The book-building exercise, at the end of a marathon tour of 17 commercial hubs in Europe, the US and SE Asia, is believed to have yielded a GDR price of roughly $10. Each GDR comprises six Gail shares.

The GDR holders, therefore, get Gail scrips at a price of roughly Rs 70 per share, which is Rs 9 lower than the price at which the scrip closed on Dalal Street on Thursday. The stock traded at Rs 79 per share, compared to Rs 83.5 per share a couple of days ago and Rs 95 a share at the time the GDR issue hit the road less than a fortnight ago.

The disinvestment through the GDR will be slightly less than the 20 per cent of government shareholding envisaged earlier. The Union government had offered 170 million Gail scrips through the GDR and kept aside another 10 million shares for a public issue.

The public issue, expected to follow shortly, will consequently be a larger offering of 25 million shares, instead of the 10 million initially planned.

The private placement of 30 million Gail shares with institutional investors earlier this year fetched the Union government a price of Rs 60 a share. The GDR share price, though a discount on the stock market rate at home, is still higher than the price fetched during the private placement with banks and financial institutions.

The price is lower, however, than what the book-building showed in November 1997, when the Gail global depository receipts issue first went on the road. The issue was pulled back mid-way because the price fetched was considered too low. Merchant banking sources say now, that tumbling financial markets and crashing stock prices had created a scare then.

The private placement reduced the Union government's shareholding in the Rs 6643 crore-turnover gas transmission (and now petrochemicals) company by 3.6 per cent, to 93 per cent. The crossholding of government shares between GAIL, ONGC and Indian Oil Corporation in March, further trimmed the Centre's stake in Gail to 83 per cent.

going for a song
A price of Rs 70 for a monopoly player like Gail is low, specially since the market price is Rs 79 down from its high of Rs 105.80 a few days back. The price is higher by only Rs 10 from the domestic issue made for the company a few years back. After which the company has doubled the capacity of its HBJ pipeline and commissioned a greenfield petrochemical plant. In spite of these fundamental improvements and a sharp improvement in its profitability, the Rs 10 rise seems to be unjustified. What seems to have affected the pricing could be low demand for the paper, which had been the case earlier for which the issue was delayed.