IFCI Plunges 24%, As It Might Become A PSU

The shares of Industrial Finance Corporation of India (IFCI) have slumped almost 24 per cent to Rs 26.65 per cent in the last five trading session. The shares plunged almost 16 per cent on 24^th August 2012 (Friday) and even continued its trend there after this week, in the wake of media reports which suggested that the company’s debentures held by the government worth Rs 923 crore would be converted into equity. 

As per the reports, the government might convert Rs 400 crore optionally convertible debentures and an additional of Rs 523 crore of loans into equity. On the back of this news there was a free fall in its share price. Reacting to the same management of the company said that they would negotiate with the government before final decision is made.

The reports also said that if the above debt is converted into equity the government stake would increase to around 55.57 per cent of the total shareholding making the company a public sector unit (PSU). If the company is majorly owned by the government than the company plans of bringing in strategic investors in the business would also be shattered. In the past investors and traders were only hoping that company finds an investors soon, which would help the company to be back on growth track.

The latest June quarter result also disappointed the streets. The topline of the company increased by 10 per cent to Rs 660 crore while bottomline de-grew by 30 per cent to Rs 93 crores. There is still no clear picture about the convertibility of company’s debt into equity. And hence we at Dalal Street Investment Journal believe that the stock would be under pressure in the short term and may move southwards.