Hind Copper FPO unlikely to hit markets this fiscal

The government and the merchant bankers are yet to come to a consensus over the valuations for the follow-on public offering (FPO) of Hindustan Copper, a delay that could push the issue to the next fiscal.

?It?s unlikely that the Hindustan Copper issue will take place in the current fiscal,? said disinvestment secretary Sumit Bose. As per earlier plans, Hindustan Copper FPO was supposed to hit the market in December 2010 and was part of the Rs 40,000-crore disinvestment plan for the current fiscal. According to persons with direct knowledge of the development, the merchant bankers were comfortable selling the issue at a price between Rs 120 and Rs 150 a share, while the government was expecting better valuations (or more price).

In anticipation that the issue will be priced at a sharp discount, the stock price has taken a hammering in the secondary market. The stock is down 35% since November and has halved from its 52-week high of Rs 612 touched last January. The stock closed at Rs 287 on Friday.

?The issue will hit the market once the company completes its expansion plans so that we can get better valuations,? Bose said.

?We are yet to take a call on the pricing. Will jointly take a call on the pricing once the company is ready to hit the market,? said S Vishvanathan, managing director and CEO, SBI Capital Markets.

According to merchant bankers, the company commands higher valuations because of its miniscule free float. The government holding in the company is 99.59% and only 0.26% is held by the public. Low free float limits ?real? price discovery as scare liquidity artificially jacks up share prices, says bankers.

Meanwhile, Hindustan Copper will have to re-file its quarter financial numbers with Sebi before its FPO could hit the market. The company in the draft red herring prospectus (DRHP) filed with the market regulator has filed its quarterly results till June 2010. As per Sebi norms, financial quarter results given in the DRHP cannot be more than six months old.

Hindustan Copper FPO is a 20% share sale, 10% being government disinvestment, while the remaining will be a fresh issue. At the current market capitalisation of about Rs 26,500 crore, the issue could mop up Rs 5,000 crore.

?The government has got larger issues on its mind first, Hindustan Copper will happen after that,? a merchant banker handling the HCL FPO on condition of anonymity. The government, which has so far raised Rs 22,763 crore through disinvestment this fiscal, is depending on SAIL and ONGC FPO to achieve the Rs 40,000 crore-target set for this fiscal.