The government is divesting 170 million shares through a book-building issue, roadshows for which are currently on. The book which is being currently built and the GDR is likely to be priced on November 4 in London. JM Morgan Stanley is the book-runner to the issue.

Merchant banking sources said that the issue has seen a good demand last week when the roadshows began, but in the last two days, there has been a weakening of sentiments. Share prices in the Indian stock markets have been taken in a beating and lost 174 points on Monday. While the government had expected a price of Rs 100 per share, the GDR is likely to priced at Rs 80-85 level. Gail's stock in the domestic market is currently hovering around Rs 80/82 level. "In the last two days, the demand has weakened," a source handling the issue said.

Analysts said that both British Gas and Enron had earlier applied to the government for a 5-10 per cent stake in Gail which was rejected by the government. Last year when Gail divested 30 million shares in the domestic market, both companies found the issue too small to bid. "This is a bigger issue so they can take a stake in the company," a oil and petroleum sector analyst in a leading domectic brokerage house said.

Merchant banking sources said that it is unlikely that these companies have bid directly. "If they have bid directly, the Government will not allocate their bids. If they have bid through an FII, there are chances of getting allotment," the source said. Allocation takes place on the same date of the pricing.

Gail had withdrawn its first GDR issue in early 1998 due to adverse market conditions which had led to much lower than expected pricing. "Every time Gail hits the GDR market something unfavourable crops up," merchant banking sources said.

The divestement in Gail was part of the disinvestement process kicked off by the government to raise Rs 10,000 crore to rein in the fiscal deficit. So far, the Government has pared its stake in VSNL through a doemstic issue and the Gail GDR issue will be followed by a MTNL and Indian Oil Corporation (IOC) GDR issue.