On the Way to Turnaround
By IE&M Research
The government established The Industrial Finance Corporation of India (IFCI) on July 1, 1948, as the first Development Financial Institution to cater to the long-term financial needs of the industrial sector. It was provided access to low-cost funds through the central bank’s SLR. To give the organization more teeth and provide direct access to the capital markets IFCI constitution was changed in 1993 from a statutory corporation to a company.
IFCI became a government controlled company subsequent to the acquisition of equity shareholding to the extent of 55.53 percent by the government in 2015. IFCI Ltd. is also registered with the RBI as a systemically important non-deposit taking NBFC. The primary business of IFCI is to provide medium to long term financial assistance to the manufacturing, services and infrastructure sectors. IFCI was one of the promoters of NSE, SHCIL, TCO, RGVN, MOI and ILD. In order to promote entrepreneurship among the scheduled castes, IFCI Group has been entrusted with the setting up of a ‘Venture Capital Fund for Scheduled Castes’ and ‘Credit Enhancement Guarantee Scheme for Scheduled Castes’ Entrepreneurs’ under the sponsorship of the Government. With this IFCI is now better equipped to contribute towards making ‘Make In India’ programme a success.
When the IFCI board gave its go-ahead to sell its 26 per cent in SHCIL, in January 2016 and subsequently the management appointed Ernst & Young LLP as the consultant for the disinvestment process, as many as 10 bidders had evinced interest. But the company later had put on hold the plans. The main reason for this decision is SHCIL’s direct holding of 5 per cent in the NSE. This holding is expected to command a higher valuation after the NSE listing. The likelihood of SHCIL coming out with its initial public offering is also high. Later IFCI sold 2.25 lakh shares of NSE for a price of Rs.3,950 per share in June 2016, and now still holds around 3.05% stake in the exchange. When SBI sold a 5% stake in the exchange around the same time at a price of Rs.4,050 per share to ChrysCapital, the transaction valued the exchange at Rs.18,220 crore.
The news about the result of the company has been discounted and IFCI is slowly getting attention and has just moved above its 30 day simple moving average.
(A disclaimer: The views expressed herein as of August 25, 2016 are based on publicly available information and other sources believed to be reliable. The information contained in this document does not have regard to specific investment objectives. Neither IE&M nor any person connected with them, accepts any liability arising from the use of this document.)