Government's stake in IFCI goes up to 55.57%

"The Cabinet on Thursday approved the proposal to exercise the option by the government to convert Optionally Convertible Debentures (OCDs) worth Rs 400 crore and Rs 523 crore  held by government in IFCI into equity. The conversion option will be exercised immediately," an official release said.

After the conversion of the OCDs, the government's of 55.57% and the holding of banks and FIs, totals to 68.31% making the IFCI a government company. Since 2001, the government had been giving funds to IFCI to help in tide over financial problems. It initially gave Rs 400 crore in the form of 20-year OCDs.

Later in 2002-03, as part of the financial restructuring package of Rs 5,220 crore, the government gave IFCI Rs 523 crore as a loan in the form of OCDs. However, the government stopped releasing funds after IFCI started making profits.

The government equity, which came down to below the threshold limit of 51% in 2005, will again go up to 55.57% and ensure compliance with the cabinet decision of 1992.

The decision to go ahead with the conversion of OCDs into equity was taken by the committee of secretaries, the release said, adding the government has also taken exemption from Sebi for application of the takeover code.

Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) cleared a proposal of Chennai-based Shriram Financial Ventures entailing foreign direct investment (FDI) worth Rs 2,000 crore. The CCEA cleared the proposal following recommendations of the Foreign Investment Promotion Board (FIPB).

The Chennai-based company has been allowed to allot shares to Mauritius-based Sanlam Emerging Markets and Sanlam Emerging Markets to hold, through Shriram Financial Ventures (Chennai), a stake (not exceeding 26%) in Shriram Capital.

The approval would result in FDI amounting to Rs 2,000 crore, a government release said.