Government to Infuse Rs.500 Crore into IFCI
The government has announced a ₹500 crore capital infusion into the state-owned Industrial Finance Corporation of India (IFCI) to boost its financial position as part of a proposed restructuring and consolidation plan. Earlier, a news was released that Government may completely ban IFCI from providing Loans Services. Also DFS had granted In-Principle Approval for Merger of IFCI Group.
IFCI is a Non-Banking Financial Company (NBFC) in the public sector and was established in 1948 as a statutory corporation and is now a listed entity on both the BSE and NSE. With six subsidiaries and one associate company, IFCI has been a cornerstone in fostering the growth of key industries and market intermediaries across India.
This move is aimed at improving the financial health of IFCI ahead of its merger with other group companies. The government’s stake in IFCI is expected to increase further from the current 71.72% as of September 2024.
The capital infusion plan was approved last week through the passage of the first Supplementary Demand for Grants for 2024-25 in the Lok Sabha. The demand includes an additional ₹499.99 crore allocated for the ‘Subscription to the Share Capital of IFCI’.
The Supplementary Demand also noted that ₹50.07 crore in savings from the same section would be used to reduce the remaining ₹449.92 crore, which will be met by surrendering savings from the capital section of the Demand No.30-DEA. This means there will be no additional cash outflow for the government. Earlier this year, IFCI had raised ₹500 crore by issuing equity shares to the government.
- Also Read: Govt may completely ban IFCI from providing Loans Services
- Also Read: Bank Merger: DFS Grants In-Principle Approval for Merger of IFCI Group
Established in 1948, IFCI was the first development financial institution in India. However, the company has been facing financial difficulties. In the second quarter of FY24, IFCI reported a loss of ₹22 crore, bringing its total loss for the first half of FY24 to ₹170 crore.
As part of efforts to revive the company, the Department of Financial Services (DFS) approved a proposal last month for the “Consolidation of IFCI Group”. This plan includes the merger of IFCI with several of its subsidiaries, including StockHolding Corporation of India Limited, IFCI Factors Ltd, and IFCI Infrastructure Development Ltd.
The proposal also includes merging other subsidiaries, such as StockHolding Services Ltd, IFCI Financial Services Ltd, and IFIN Commodities Ltd, into a single entity, which will be a direct subsidiary of the newly consolidated IFCI.
IFCI, which was originally set up as a statutory corporation, transitioned to a company under the Indian Companies Act in 1993 to better respond to the changing financial landscape. In 1999, its name was changed to IFCI Ltd. In 2015, the government raised its stake in IFCI to over 51%, making it a public sector company once again.
