IFCI stake sale draws overseas suitors

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According to sources close to the development, IFCI had invited expression of interest (EoI) from domestic as well as overseas investors for sale of its stake. The last date for expressing interest was September 14.

Besides DE Shaw, which made an entry into India recently and manages over $30 billion worth of funds for both private and institutional investors, other foreign investors drawn to the stake sale include Citigroup, Lehman Brothers, Blackstone, GE Capital, BNP Paribas, Deutsche Bank, Standard Chartered Bank and Barclays.

DE Shaw, the world's fourth largest hedge fund, is reportedly planning to invest $1 billion in India by June 2008. Its investments so far in India include $400 million in DLF SEZ, a stake in India's leading animation software company Crest Animation and a stake in Hindi newspaper Amar Ujala, a part of media group Dainik Jagran.

Anil Dhirubhai Ambani Group (ADAG) company Reliance Capital, Punjab National Bank and India's largest life insurance company, Life Insurance Corporation of India (LIC) are few of the domestic players which have shown interest in the stake sale. However, LIC pulled out of the race subsequently, citing reasons that it was "comfortable with the existing 8 percent stake" it has in IFCI.

According to sources, IFCI is expected to announce the names of the shortlisted candidates on September 25 and issue a request for proposal (RFP) to the selected companies. The strategic investor induction process is likely to be over by January 2008, the sources said.

An IFCI official said the minimum criteria for eligibility to participate as a buyer in the stake sale is [1] at least five years' experience in financial services and [2] an average asset portfolio of $2 billion (Rs. 8,000 crore) in the last three years.

In addition, the participant must also fulfil any of the following criteria: [1] maintain an asset book of at least $2.5 billion (Rs. 10,000 crore) in immediate last financial year or [2] have a net worth of $1 billion (Rs. 4,000 crore).

Only at the RFP stage, IFCI will make a distinction between various PE investors, the official said, adding that the institution will not prefer asset strippers and pure short term investors looking to maximise investments.

There will also be a lock-in period of three years for the entity or the consortium which would be selected as the new shareholder. The total number of members in a consortium should not be more than four, the official added.

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