IFCI

IFCI reported Rs 497 crs net for Q2 as against Rs 246 crs for Q1 on equity of Rs 638 crs Full year expected Rs 2470 crs EPS Rs 39 fair value on PE of 7 is Rs 273 and at cmp 85 3 times upside is still left. IFCI also entered realty biz on its own. Acquired land at common wealth for Rs 100 crs which will be an Rs 500 crs project with.

IFCI has decided to convert Rs 1480 crs debt including that of LIC of Rs 500 crs at the SEBI formulae price i.e 6 months weighted average or 15 days weighted average whichever is higher.

The six month weighted average is Rs 52 whereas 15 days is Rs 92 which means the debt will be converted at Rs 92 per share. Rs 10 will be part of equity and Rs 82 will go to reserves. The impact will be rise in equity by Rs 160 crs and in reserves Rs 1320 crs.

The new diluted equity will then be Rs 798 crs and EPS expected could be Rs 31 and & PE the adjusted price should be Rs 217 per share. However it is remarkable that IFCI will become a debt free company and the book value will rise by whopping Rs 48 by the end of the year making IFCI a cheapest financial sector co.

With further 26% stake dilution, the reserves will swing close to book value making IFCI a very strong company into making.

This is a well marked beginning by IFCI in the Govt sponsored role model of PSU realty. Having dropped the plan to de-merge realty biz IFIC board has taken decision to start realty in a separate realty division and common wealth is beginning of the same.

With this IFCI will be a clear re rating story and the offer of Rs 127 for 26% stake could still become attractive for IFCI on going forward.