The Indian government has decided to infuse ₹500 crore into the state-owned Industrial Finance Corporation of India (IFCI) to strengthen its financial health ahead of the company’s restructuring. This infusion will likely increase the government’s stake in IFCI beyond its current holding of 71.72% as of September 2024. The decision was approved as part of the first Supplementary Demand for Grants for 2024-25 in the Lok Sabha, with funds reallocated from savings in the capital section, ensuring no additional cash outflow.
Capital Infusion and Financial Health
The ₹500 crore capital infusion follows earlier efforts to stabilize IFCI, including a ₹500 crore raise through equity shares earlier this year. Despite these efforts, IFCI faced a ₹22 crore loss in Q2 of FY24, accumulating a total loss of ₹170 crore in the first half of the fiscal year. The government’s continued support aims to stabilize the financial institution and prepare it for upcoming structural changes.
Restructuring Plans for IFCI Group
A major part of the government’s strategy includes the proposed restructuring and consolidation of IFCI’s group companies. The Ministry of Finance has approved the amalgamation of IFCI with StockHolding Corporation of India Ltd, IFCI Factors Ltd, and other subsidiaries like IFCI Infrastructure Development Ltd. This restructuring aims to create a unified, stronger entity to better meet the financial demands of India’s industrial and infrastructure sectors.
Legacy and Evolution of IFCI
Established in 1948 as India’s first Development Financial Institution, IFCI has played a pivotal role in financing critical projects across various sectors. Over the years, it has evolved from a statutory corporation to a public limited company and, in 2015, became a public sector company with the government’s stake crossing 51%. This infusion and restructuring reflect the government’s ongoing efforts to maintain IFCI’s relevance in India’s financial ecosystem and ensure its capacity to support industrial and infrastructural growth.
Summary of the news
| Why in News | Key Points |
|---|---|
| Government Infuses ₹500 Cr in IFCI | – The Indian government has decided to infuse ₹500 crore into IFCI to improve its financial health. |
| Government Stake | – The government’s holding in IFCI is 71.72% as of September 2024. This infusion will likely increase the stake further. |
| Capital Allocation | – The capital infusion was approved as part of the Supplementary Demand for Grants for 2024-25 in the Lok Sabha. |
| Losses of IFCI | – IFCI reported a ₹22 crore loss in Q2 FY24 and ₹170 crore loss in the first half of FY24. |
| Earlier Fundraising | – Earlier in FY24, IFCI raised ₹500 crore through equity shares issued to the government. |
| Restructuring Plan | – IFCI is undergoing restructuring with the proposed consolidation of its subsidiaries, including StockHolding Corporation of India, IFCI Factors Ltd, etc. |
| Year of Establishment | – IFCI was established on July 1, 1948, as India’s first Development Financial Institution. |
| Transition of IFCI | – In 1993, IFCI transitioned from a statutory corporation to a company under the Indian Companies Act, 1956. |
| Public Sector Status | – In 2015, the government raised its stake in IFCI to over 51%, making it a public sector company. |
55th GST Council Meeting: Key Highlights...
India's FY26 Economic Outlook: Modest Gr...
Net Direct Tax Collection Sees Robust 16...
