Govt To Infuse Rs 500 Crore In IFCI To Improve Its Financial Health

New Delhi: 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 Indian government's holding in the company is expected to further increase from the existing 71.72 per cent as of September 2024. The capital infusion plan for IFCI was approved through the passage of the first Supplementary Demand for Grants for 2024-25 in Lok Sabha last week.

The Supplementary Demand for Grants for 2024-25 allocated 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. 

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Government approves ₹500 crore capital infusion in IFCI to strengthen financial health.

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.

IFCI's Revival Plan: Merger of Subsidiaries to Strengthen Financial Stability

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 the 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 merge into a single entity, becoming a direct subsidiary of the consolidated listed entity.

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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 IFCI. Established in 1948 as a statutory corporation, IFCI currently has many subsidiaries, 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' effective 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.