Date: 18 Jan 2018
At the time of writing this post, the government is in the mood to privatize PSUs and IFCI is no exception.
IFCI is a troubled stock with over 7500 crore NPAs and is losing cash.
BUT, there’s a gold lining:
- The government is beating lax and irresponsible babus with a stick and IFCI management is busy optimizing operations. Last year they closed 7 poorly performing branches.
- It is very likely that the government will part-privatize IFCI to make the company efficient. It has made a start with SAIL.
IFCI owns very valuable subsidiaries and rich assets. Let’s discuss these:
IFCI’S SUBSIDIARIES
- Stock Holding Corporation of India (SHCIL): Needs no introduction to investors. In turn SHCIL owns 2 subsidiaries – (i) SHCIL Services (stock broking) Ltd and (ii) Stock Holding Document Management Services Limited. IFCI holds 53%.
- IFCI Infrastructure Development Ltd (IIDL) – a real estate development company. It also owns a hotel in Delhi (Fraser Suites), commercial and residential properties, and factory lands. IFCI holds 100%.
- IFCI Venture Capital Funds Ltd – fund for startups with focus on rural areas. IFCI holds 99%.
- IFCI Financial Services Ltd (Stock, commodity and currency trading). IFCI holds 95%.
- IFCI Factors (Financing on the basis of accounts receivables). IFCI holds 99%.
- MPCON – Technical and project consultancy. IFCI holds 80%.
IFCI’S ASSOCIATES
- Tourism Finance Corpn of India (IFCI holds 26% stake) – Promotes tourism
- KITCO Ltd – Builds airport infra. IFCI holds 20%.
- INSTITUTE OF LEADERSHIP DEVELOPMENT and MANAGEMENT DEVELOPMENT INSTITUTE– management institutes
IFCI’S INVESTMENTS
- Quoted securities worth 497.23 crores. It owns some cats and dogs and a whole lot of blue chips valued at acquisition cost.
- IFCI owns a lot of unquoted shares that can potentially wipe out a good part of its NPAs, perhaps all of the NPAs. For example, it owns 20,00,000 Clearing Corporation of India Ltd shares at Rs 10 each. Though the valuation of CCIL is not disclosed, its EPS is about Rs 75 and therefore on a conservative basis that each share can be valued at about Rs 1,000.It also owns 1.20 crore shares of NSE at 116. Considering BSE is quoting around 850, NSE should quote much higher.Likewise, IFCI owns crores of shares in unlisted companies – all of which have solid potential. Another example is that of Meta Alloys of which IFCI owns 2.8 crore shares at 19 bucks. Meta Alloys is a significant manufacturer of copper and copper alloys and it is based in Goa. Any one dark horse share when listed can wipe out IFCI’s NPAs.
Total value (at cost) of all of IFCI’s investments is 5,557.40 crores. Applying a very low and rough market value of Rs Rs 100 per instrument gets us 55,574 crores – about 7+ times IFCI’s NPAs.
Rounding up, it makes immense sense to consider making an investment in IFCI because:
1. Government is proactive in controlling its lax management
2. Privatization may be around the corner
3. IFCI owns fantastic assets
4. IFCI can demerge subsidiaries and create massive value for its investors
5. The government’s focus on infrastructure makes it a compelling play in the sector.
Good Pick!
Sir can this be bought now ? The share price has gone down since January. What is your view on this today ?
Yes, for the long term
IFCI I had bought at 30 Rs sir its now trading at 16Rs is it a good time to average sir, I am looking at a long term.
I guess so. I was long at 29 and averaged at 19.
Sir, I am holding 1000 shares from 30₹ can I average at 16.00 sir
Sir Picked up few at 29 and 20. It’s at 11 now.. your views for a long term prospectives? Looks like npa is affecting them or people confusing stock with if&ls 🙂
One day it will change hands. Government cannot continue operating this white elephant. I too was long at 29, booked out at 17
If I rightly recall IFCI was suppesed to be having a bank licence , this was quite a big news in 2007 and Ifci traded around 150 for a long time. But then govt killed the hope of it going private by converting the loan advanced by it into equity . This banking licence status though was never confirmed. But it’s investment as outlined above continues to be same .
Sir,this government is taking lots of time while taking decision… Will tell something will approve something…we cannot trust on this government only by saying 🙂 They will make white elephant to ant then finally will take decision
I agree with you. IFCI was a bad choice.
Sir I have 30000 share at average 29 please suggest what I do
Even I bought a large quantity at 29. Sold at 17 and booked loss. Always work with a SL.
I have 30000 at 30 can I average now can it go below 10 any future of ifci
Wait till this election shakeout plays out
Hello sir,
I had bought 3000 shares of ifci at about 21. Today it went down at 10.what should be my call- Buy and average or hold or book loss.
Hi Ritesh, I had entered at 29 and exited at 17. The asset quality has deteriorated since I wrote this article.
shall i buy for long term?
Not now because of compliance issues. Also Please check prior comments.. I too booked loss. The strategy should be to buy a limited quantity if it falls to 4-5 bucks
I am still holding ifci @55 huge qty what should I do
I burned my hands too. Bought at 29 sold at 17. Big loss. I recommend that you always work with a SL
Hi Mr Sunil ifci is at 4 now shall I invest for 1,00,000 shares pls suggest.
All its assets that I covered in this blog have more or less seen a lot of value destruction. I burned my hands by booking a big loss at 17 bucks. Maybe if it crashes to 1 or 2 bucks you can start picking up small quantities.. like for 2000-5000 per month. Its fortunes can only change when we have an economist overseeing PSUs
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