The government has decided to infuse Rs 500 crore capital in state-owned IFCI to improve its financial health ahead of the company’s proposed restructuring and consolidation into a group.
With the infusion, the government of India’s holding in the company is expected to further increase from existing 71.72 per cent as on September 2024. The capital infusion plan for IFCI was approved through the passage of the first Supplementary Demand for Grants for 2024-25 made an allocation for an additional amount of Rs 499.99 crore for ‘Subscription to the Share Capital of Industrial Finance Corporation of India (IFCI).
“Taking into account savings of Rs 50.07 crore available in the same section of the grant, the remaining amount of Rs 449.92 crore will be met from surrender of savings available in the capital section of Demand No.30-DEA and it will not entail any additional cash outgo,” the Supplementary Demand for Grants said.
Earlier this year, IFCI had raised Rs 500 crore capital through the issuance of equity shares to the government.
The Industrial Finance Corporation of India was set up by the government on July 1, 1948 as the first Development Financial Institution in the country.
In the second quarter ended September 2024, IFCI had booked a loss of Rs 22 crore and in the first half of FY24, a loss to the tune of Rs 170 crore.
As part of the revival and restructuring, the Department of Financial Services (DFS), Ministry of Finance, last month in-principle approved ‘Consolidation of IFCI Group’ which entails merger/amalgamation of IFCI Limited and StockHolding Corporation of India Limited and other group companies.
As per the proposal, StockHolding Corporation of India Ltd, IFCI Factors Ltd, IFCI Infrastructure Development Ltd and IIDL Realtors Ltd will merge with IFCI Ltd.
Further, StockHolding Services Ltd, IFCI Financial Services Ltd, IFIN Commodities Ltd and IFIN Credit Ltd will be merged into a single entity, which will be a direct subsidiary of the consolidated listed entity.
Additionally, StockHolding Document Management Services Ltd, StockHolding Securities IFSC Ltd, IFIN Securities Finance Ltd, IFCI Venture Capital Funds Ltd and MPCON Ltd shall be direct subsidiaries of the consolidated listed entity that is IFCL
Established in 1948 as a statutory corporation, IFCI currently has many subsidiaries and joint ventures and associates under its fold.
By the early 1990s, it was recognised that there was a need for greater flexibility to respond to the changing financial system. It was also felt that IFCI should directly access the capital markets for its funding needs
It is with this objective that the constitution of IFCI was changed in 1993 from a statutory corporation to a company under the Indian Companies Act, 1956.
Subsequently, the name of the company was also changed to ‘IFCI Ltd’ with effect from October 1999.
However in 2015, the government again raised its stake in the firm to over 51 per cent, making it a public sector company.