Saturday, September 29, 2007

IFCI shortlists 8 bidders for stake sale

IFCI has shortlisted eight bidders for the sale of its 26% stake including consortia led by Wilbur L Ross and Shinsei Bank, reports ET. No official communications has yet reached the bidders, according to industry sources. As many as 10 bidders had applied earlier this month. The identity of the bidders that have been left out of the race is not known. Other members of the consortium led by Wilbur Ross include Standard Chartered Bank, HDFC and Goldman Sachs. Punjab National Bank and JC Flowers are part of the consortium led by Shinsei Bank.

“Official communication is yet to reach us. Shinsei Bank is a long term player. JC Flowers is one of the biggest private equity groups investing in stressed assets. And Punjab National Bank is a domestic institution, so there is a natural synergy,” a member of the consortium said. Sources at Blackstone and IDFC refused to comment on the matters.

Among others who had submitted EoIs include Kotak Mahindra Bank, GE Capital, Cargill (FS), Newbridge Asia, French bank Natixis and a consortium between Sterlite and Morgan Stanley. Officials at IFCI refused to divulge the names of the shortlisted bidders, but maintained that at this stage, it would not make sense to reduce the number significantly and therefore impact the competitive pricing of the valuation. The markets have been abuzz with the IFCI scrip touching Rs 105 earlier this week. It closed at Rs 92.65 on Thursday, on the NSE.

Asked if speculative stock prices would impact valuation of the 26% stake, sources at IFCI said, “it is possible that there could be wide variation on the valuation amongst the shortlisted bidders.” Market sources peg the 26% stake in IFCI between $ 500 million and $ 800 million. Financial bids submitted will need to factor in the second quarter results of IFCI.

Analysts say that valuation of IFCI may suffer, if the share price climbs up because of speculation. “If the bidders feel that the IFCI share price is overvalued, they might not arrive at an optimum value for the 26% stake. This is one of the reasons why Barclays did not finally submit the bid for IFCI,” an analyst said. A source at Barclays said, “We found IFCI to be overvalued. Besides, there is only a 26% window. Hence, Barclays decided against submitting the bid after considering it initially.”

The bidders will be informed latest by October 1. A pre-bid conference is scheduled for October 3. Thereafter, the shortlisted entities would be asked to undertake due diligence. Request for proposal (RFP) would be issued a week later. By November, financial bids will be submitted. The board would then finalise the name of the strategic investor.

According to conditions set by IFCI, there is a lock-in period of three years for the entity or the consortium which would be selected. IFCI has said that the bidder should be in the business of financial services with a long-term interest in the institution.

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