Tourism Finance Corporation bets big on open offer to shore up fortunes

Earlier, IFCI Ltd, the erstwhile Industrial Finance Corporation of India, was the promoter, but deteriorating asset quality of the state lender restricted the growth of TFCI. At the end of FY16, IFCI held 39.1 percent stake in TFCI and has been gradually reducing its stake every quarter.

In September 2017, IFCI sold 24 percent stake to India Opportunities III Pte Ltd (4 percent), Redkite Capital Management (13.3 percent) and Sanjeev Thomas (2.5 percent), and now three shareholders collectively hold 19.8 percent stake in TFCI.

Recently, three shareholders launched a voluntary open offer with the approval from the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (Sebi), to acquire additional 26 percent stake in TFCI at Rs 161 per share.

For the future growth, open offer acceptance ratio and revive in core business post change in management can drive TFCI's fortune.

The open offer starts from February 5, 2019 to February 18, 2019 and is to buy 2.09 crore shares at Rs 157.2 per share with an interest of Rs 4.18 per share and it comes to Rs 161 per share. If fewer shareholders look to participate in the open offer, then the acceptance ratio will be higher.

In January 2019, the TFCI management told CNBC-TV18 that the current size of loan book is Rs 1,700 crore and it can be increased to Rs 5,000 crore without fresh capital.

The TFCI’s non-performing assets (NPAs) stood at four percent and that is expected to come down to 2.5 percent.

If the new management brings major changes to the company’s functioning and if that leads to better business, then TFCI could be an interesting play for the investors.

However, if domestic tourism story slows down and the new management was unable to make any impact in the company, that could be the biggest challenge for TFCI in the future growth.