IFCI slumps 16% as investors fear fall

'The stock reacted negatively on concerns the book value of the company will get diluted'

Shares of IFCI today plunged over 16 per cent,a day after the government approved conversion of Rs 923 crore debentures held by it in the company into equity,which will increase its stake in the financial institution to 55.57 per cent.

Analysts said the stock came under heavy selling amid reports the government will convert debentures into equity which will lead to dilution in earnings per share.

“The stock reacted negatively on concerns the book value of the company will get diluted,” SMC Global Securities Strategist & Head of Research Jagannadham Thunuguntla said.

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Post conversion of the Optionally Convertible Debentures (OCDs),the holding of government will become 55.57 per cent,including the holding of Banks/FIs,it will be 68.31 per cent making it a government company.

On BSE,the stock was down 17.31 per cent intra-day before settling at Rs 29.25,down 16.31 per cent.

The scrip closed 16.31 per cent lower at Rs 29.25 on NSE.

The government had been giving funds to IFCI since 2001 to tide over the financial problems. It initially gave Rs 400 crore in the form of 20-year OCDs.

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Later in 2002-03,as part of the financial restructuring package of Rs 5,220 crore,the government gave IFCI Rs 523 crore as loan in the form of OCDs.

However,the government stopped releasing funds after IFCI started making profits.