Thursday, December 20, 2007

IFCI Shares Plunges 24% After It Scraps Share Sale Plan

IFCI Ltd. shares posted their biggest drop in at least 13 years after the Indian project financing company scrapped a plan to sell a stake in itself, disappointing investors who'd driven the stock up eightfold this year.

IFCI shares fell 22.85 rupees, or 23 percent, to 77.2 rupees at 10:20 a.m. on the Bombay Stock Exchange, after falling as much as 27 percent, the biggest decline since at least February 1994. The decline wiped out 14 billion rupees ($354 million) from the company's market value.

The move dashed expectations for a strategic partner, which investors had counted on to help the New Delhi-based company boost capital and manage assets acquired from failed loans. IFCI, which was bailed out by the government, yesterday failed to agree on terms with investors led by Sterlite Industries (India) Ltd. and Morgan Stanley to take a 27 percent stake.

``It is a major disappointment for investors and the stock may lose as much as 40 percent in the next few days,'' said M.A.A. Annamalai, director at Akshaya & Co., a Chennai-based retail stockbroker. ``It may be a long time before investor interest returns to it.''

The board of the project-financing company, India's oldest, will meet later to seek other ways to revive the business, S.P. Arora, IFCI's company secretary, said yesterday, without elaborating.

The run-up in the share price ahead of the final bids also deterred buyers. As many as seven of the 10 investors which indicated interest earlier pulled out of the final bidding.

Sterlite Industries and Morgan Stanley were front runners to clinch the stake after investors such as Blackstone Group LP and Goldman Sachs Group Inc. dropped out.

J.C. Flowers, the private-equity firm founded by J. Christopher Flowers, a former Goldman Sachs managing director, had planned to bid with Tokyo-based Shinsei Bank Ltd. and India's Punjab National Bank Ltd., IFCI said in September.

Infrastructure Development Finance Co. Chief Executive Officer Rajiv Lall said in an interview on Oct. 9 that the price had risen too much. IDFC pulled out of the bid, as well as Natixis SA of France and India's Kotak Mahindra Bank Ltd.

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