Malay Mukherjee, MD and CEO of IFCI in an interview to CNBC-TV18 clarified that the government infusing Rs 60 crore in the company would not bring in cash into the company books but in fact government would be buying preference shares from some banks or existing shareholders to increase their stake in IFCI. The government would now hold 51 percent stake in IFICI, he added.
The Union Cabinet yesterday approved infusion of Rs 60 crore in Industrial Finance Corporation of India (IFCI) Ltd to make it a government company by way of acquisition of preference shares from existing shareholder(s).
Mukherjee also clarified that the company as of now is adequately capitalised and is not looking for any further capital infusion.
Commenting on the 2.5 percent National Stock Exchange (NSE) stake sale, he said the company is currently in negotiations with a foreign fund and expects to close the deal in fourth quarter by January end or February. The company had got 2-3 bids earlier but the price was below their expectations.
Tourism Finance Corporation of India (TFCI) for the company has always been a strategic investment and disposing of 2 percent stake was just to book some profitts They still hold 26 percent stake in the TFCI, said Mukherjee.
Below is the transcript of Malay Mukherjee's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: Take us through the government's plan to infuse Rs 60 crore in the company. What does it entail?
A: The capital infusion is not the way it should be spoken. I would like to explain that before this infusion the capital structure of IFCI is total capital of Rs 1,920 crore out of which Rs 1,660 crore was buy of equity and Rs 260 crore was by preference capital. Out of this Rs 1,660 crore Government of India holds Rs 923 crore which is 55.5 percent, so it has a majority stake but in preference share they do not have any stake. So, when we talk of capital, the total capital vis-à-vis the government's stake, it was falling below 51 percent.
So now with this Rs 60 crore being infused by the government, what will happen is that they will buyout preference share from some banks and make the company as a government company as per Section II of Companies Act because government's stake will go up to 51 percent in the capital – that's what has happened. It is not that company is getting Rs 60 crore. It is a preference share, government is acquiring from some banks.
Ekta: What will the government stake now rise to, post this exercise?
A: Fifty one percent in total capital.
Anuj: Will the government look to infuse more money and raise its stake further?
A: As of now we do not need any further money because we are capital compliant and our capital adequacy is more than 21 percent, so we do not need any capital now. We have sufficient capital adequacy and also we have the lines available from various banks, we are able to raise money through bonds, so we do not need any money as of now.
Anuj: What is your exposure to Dabhol and what is the current status?
A: Our exposure is around Rs 400 crore but up to March 2015 we do not see any threat for becoming NPA. Of course it is a matter of concern for all the lenders and we are very hopeful with the large lenders State Bank of India, IDBI and also ICICI Bank, partly we are also there, something will come out. I believe the ministry of power and ministry of finance both are keenly trying to solve the problem.
more to come
IFCI stock price
On December 30, 2014, at 14:09 hrs IFCI was quoting at Rs 37.65, down Rs 0.05, or 0.13 percent. The 52-week high of the share was Rs 44.90 and the 52-week low was Rs 21.80.
The company's trailing 12-month (TTM) EPS was at Rs 3.50 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 10.76. The latest book value of the company is Rs 40.42 per share. At current value, the price-to-book value of the company is 0.93.
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