IOC selloff plan gets off ground, 6 merchant bankers appointed
New Delhi 18-Nov-2010
State-run IndianOil has appointed six merchant bankers for its proposed public issue, setting the ball rolling for India’s biggest-ever equity offering – the over Rs. 19,000-crore issue that will meet half of India’s disinvestments target in the current fiscal.
The list of merchant bankers that bagged the prestigious mandate includes four global giants—Citigroup, BofAMerrill Lynch, Morgan Stanley and UBS, two investment bankers and top officials in IOC and the oil ministry said.
India’s ICICI Securities and SBI Capital Markets , wholly owned subsidiary two large banks -- ICICI Bank and State Bank of India – are the other two merchant banks that will manage the issue that is expected in January 2011, one of the banker said.
This would be the first time that merchant bankers have been appointed purely on the basis of technical criteria. Since government has made a minimum fee of Rs. 6 lakh mandatory for the bankers, every merchant banker quoted the similar amount, said another banker.
Except SBI Capital Markets, all the merchant bankers involved in the public issue of Steel Authority of India have been excluded from IOC’s offering. “The government appoints the bankers alternately. Those bankers involved in Coal India were excluded in case Power Grid. While those in Power Grid were excluded in SAIL and similar trend were followed in case of IOC,” said a banker.
Among the 18 banks which pitched for managing the high-profile issue several prominent contenders lost out. These include JP Morgan, Deutsche Bank, Enam Securities, HSBC and Kotak Mahindra, which are involved in other issues by state firms.
The proposed follow-on public offer (FPO) qualifies for the Securities and Exchange Board of India’s fast-track norms that help well-established and compliant listed companies to quickly access the market.
The Rs. 19,000-crore public offer dwarfs Coal India’s Rs. 15,000-crore offering and may hit the market by January as the company can enter the market immediately after filing prospectus with the SEBI, said a company official.
The proposed public issue includes 10% stake divestment by the government that will help it meet its disinvestments target of . 40,000 crore this fiscal, and the issue of 10% fresh equity capital that will help the country’s largest state refiner fund its capital investment.
“While SAIL issue is also slated for January 2011, officials said that chances of IOC entering the market before SAIL was good as IOC issue would fetch the exchequer over Rs. 9,000 crore while in case of Sail, the government’s share would be Rs. 4,000 crore,” the banker said.
Out of the disinvestments target of Rs. 40,000 crore in the current fiscal, the government has already raised Rs. 21,000 crore by selling stakes in Satluj Jal Vidhyut Nigam, Engineers India, Coal India and Poweer Grid.
After Hindustan Copper and Maganise Ore Ltd that are likely to enter the market next month, IOC and SAIL that will enter in January, the total proceeds will cross Rs. 40,000 crore.
At the last closing price of Rs. 389.35 per share on Wednesday, the market capitalization of IOC is Rs. 94,532 crore. At this price, the offer size will be Rs. 18,900 crore.
Following the issue, government’s stake will come down 62.65% from the current holding of 78.92%. Out of the current float size of 21.08%, ONGC owns 8.77% and another 2.42% is owned by the two trusts created after the merger of BRPL and IBP.
