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Tamal Bandyopadhyay
MUMBAI, Oct 14: Domestic merchant bankers may boycott the Rs 5,000 crore disinvestment programme as the rift between the Indian outfits and global coordinators has widened.
According to sources in New Delhi, SBI Caps -- the leading domestic merchant banker -- has already dropped out of the IOC issue. Three other Indian merchant bankers roped in for the issue -- JM Financials, Kotak Mahindra and Enam Securities -- may also reconsider their participation.
When contacted, SBI Caps managing director AR Barwe refused to comment. "This is our internal matter. I don't want to discuss the issue," he said.
SBI Caps has also submitted a counter-proposal to the task force on disinvestment offering "hard" underwriting for the domestic part of the Indian Oil Corporation (IOC) issue, finance ministry sources said. This is in contrast to the global coordinators' commitment to "soft" underwriting support to the GDR issues.
The domestic merchant bankers are also opposing the original finance ministry plan of running"joint books" for simultaneous GDR and domestic flotations.
Things reached a flash point on Tuesday when the global coordinators for the IOC issue reportedly asked the Indian merchant bankers to walk out when the "sensitive" pricing issue was discussed with the task force.
SBC Warburg, the global coordinator for the Container Corporation of India (Concor) disinvestment, has already ruled out the possibility of a GDR issue. The task force has retained SBC for the proposed domestic issue even though the global investment bank does not have a Securities & Exchange Board of India (Sebi) registration, merchant banking sources said.
The beauty parade for the VSNL global depository receipts issue will be held on October 20. The finance ministry had chosen SBI Caps and Kotak Mahindra last year to lead manage the domestic issue of VSNL which never hit the market. This time, SBI Caps is teaming up with ABN Amro for the GDR mandate.
According to sources in New Delhi, Indian merchant bankers are in favour ofdividing the floats between domestic and GDR issues and run the domestic books on their own instead of acting as co-lead managers to the global arrangers. CSFB and Goldman Sachs have been appointed as the global coordinators for the IOC issue.
SBI Caps has offered "hard" underwriting facility for the entire IOC domestic float in contrast to global arrangers' "soft" offer. In "soft" underwriting system, the merchant bankers first procure orders and go back to the prospective investors after working out the average price, and only after receiving the confirmation from the investors give the underwriting commitment. In contrast, "hard" underwriting is given in advance irrespective of investors' response.
If the domestic merchant bankers finally decide to walk out of the disinvestment programme, this will be the first instance of global investment bankers steering the Indian government's public sector disinvestment. Historically, the domestic merchant bankers had all along managed the show.
They havemanaged the domestic floats of MTNL, SAIL, HPCL, BPCL and IOC, besides disinvestments in three public sector in Karnataka and two in Gujarat.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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