The price of $9.25 per GDR is much below the expected price of $12 per GDR the Government was hoping to attain when the roadshows started. The Government has raised $185 million (approx Rs 786 crore) through the offering.

The Government has made no allocation to the banks and insurance companies that had bid for VSNL's shares in the domestic market. Merchant banking sources said that domestic bidders had bid at Rs 725, while the Government priced the VSNL share at Rs 786. Among the bidders were Life Insurance Corporation, General Insurance Corporation and its four subsidiaries, State Bank of India and its associate banks including State Bank of Saurashtra. The sources blamed thetask force's insistence on running a common book for the international and domestic offering for non-allocation to domestic investors.

The price of $9.25 is at a discount of 1.40 per cent to the last traded GDR price (prior to the pricing) of $9.37 per GDR on the London Stock Exchange. It is, however, at a 6 per cent premium to the average last 10 days price on the Bombay Stock Exchange (BSE).

According to VSNL, the price is also 15 per cent more than the closing price of Rs 682 on the BSE on February 10, when the roadshows for the GDR issue closed. The price is at a premium of 12 per cent to Thursday's closing rate of Rs 699. The price pales before the $13.93 price the company had achieved for its GDR offering less than two years ago. Market players said that following the listing of the fresh GDRs on Thursday, sentiment in these perked up and they were traded at about $10 per GDR.

A VSNL statement said that the offering evinced "exceptional interest" from high-quality investors leading to a demand of37.95 million GDRs, with a total bid of $ 341 million. "The Government disinvestment offer was for 20 million GDRs, including a greenshoe option, against which the demand of 37.95 million GDRs was registered," the company stated. VSNL's acting chairman and managing director Amitabh Kumar said: "We have been able to generate high-quality demand from discerning investors even in difficult market conditions, particularly for the emerging markets."

"The quality demand from international investors reaffirms their faith in VSNL as a global telecom-service provider," he added. VSNL maintained that the sentiment for equity issues in Asia and other emerging markets was difficult, with many major issues being either "pooled or being traded down". "Against this, the demand generated by VSNL indicates the value which is perceived by investors in India's premier telecom company," VSNL stated. Even though the company formally claimed that the issue was a big success, sources close to the deal said that the Governmentcould have got a much better price but for a few factors that went against it.

The confusion over the monopoly status of the company, the entry of Mahanagar Telephone Nigam into the Internet area, and delays by the Government in filling up key vacancies could have all led to the firm not getting a higher price, said the sources close to the deal. "The company went to the market without a full-time chairman-cum-managing director and a finance director appointed less than a fortnight before the roadshows.

This does not reflect well on a company," said an analyst with a foreign brokerage. The head of another foreign brokerage said that the premium over the domestic price which the issue had got was not very high, as historically, the GDR of VSNL had always had a high premium to the underlying share, given the high level of illiquidity in the scrip in the domestic market.INSIGHT

Not a bad dealThe final pricing of VSNL's issue at $9.25 per GDR comes as no surprise. With the uncertainties thecompany is faced with, it was ambitious to expect $12-12.5 per GDR. In the domestic market, the scrip closed at Rs 700, and at $9.25 per GDR, the issue price per share would work out to around Rs 786.

The company's GDR issue has, therefore, been able to garner a premium of over 12 per cent over the prevailing domestic price. Considering that most GDR issues have attracted premiums ranging from 2-5 per cent, this is not bad at all.