₹500 Crore Boost for IFCI: Govt Raises Stake to Revitalize and Restructure Iconic Financial Institution

New Delhi (The Uttam Hindu): The government has decided to inject ₹500 crore into the state-owned Industrial Finance Corporation of India (IFCI) to enhance its financial health ahead of the company's planned restructuring and consolidation into a group. Following this capital infusion, the government's stake in IFCI is expected to rise from the current 71.72% as of September 2024. This move was approved with the passage of the first Supplementary Demand for Grants for 2024-25 in the Lok Sabha last week. The Supplementary Demand for Grants allocated an additional ₹499.99 crore for "Subscription to the Share Capital of Industrial Finance Corporation of India (IFCI)." According to the Supplementary Demand, savings of ₹50.07 crore in the same section of the grant will be utilized, and the remaining ₹449.92 crore will be sourced from the surrender of savings in the capital section of Demand No. 30-DEA, ensuring no additional cash outflow.

Earlier this year, IFCI had raised ₹500 crore by issuing equity shares to the government. The Industrial Finance Corporation of India, established by the government on July 1, 1948, was the first Development Financial Institution in the country. In the second quarter of FY24, which ended in September 2024, IFCI reported a loss of ₹22 crore, and for the first half of FY24, the loss stood at ₹170 crore. As part of its revival and restructuring process, the Department of Financial Services (DFS), Ministry of Finance, in principle, approved the 'Consolidation of IFCI Group' last month. This consolidation involves the merger of IFCI Ltd with StockHolding Corporation of India Ltd and other group companies. The proposal includes merging StockHolding Corporation of India Ltd, IFCI Factors Ltd, IFCI Infrastructure Development Ltd, and IIDL Realtors Ltd with IFCI Ltd.

Additionally, StockHolding Services Ltd, IFCI Financial Services Ltd, IFIN Commodities Ltd, and IFIN Credit Ltd will merge into a single entity, a direct subsidiary of the consolidated listed entity. Other subsidiaries, such as StockHolding Document Management Services Ltd, StockHolding Securities IFSC Ltd, IFIN Securities Finance Ltd, IFCI Venture Capital Funds Ltd, and MPCON Ltd, will also become direct subsidiaries of the consolidated IFCI. Established in 1948 as a statutory corporation, IFCI now encompasses several subsidiaries, joint ventures, and associates. In the 1990s, the need for greater flexibility in responding to a changing financial system led to the decision to allow IFCI to directly access capital markets for its funding needs. Consequently, in 1993, IFCI's constitution was changed from a statutory corporation to a company under the Indian Companies Act, 1956. In October 1999, the company name was changed to 'IFCI Ltd.' However, in 2015, the government raised its stake in the company to over 51%, making it a public sector enterprise once again.