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Steel Authority of India Ltd (SAIL)’s offer for sale (OFS), where the government will divest a 5% stake, may collect about `2,000 crore, higher than `1,514 crore raised in March 2013 for the sale of a 5.82% stake, top executives in the company said.
The company’s shares have risen 45.92% since then.
The state-run steelmaker’s OFS could hit the market in August-September and is likely to follow divestment of part of the government’s stake in Oil and Natural Gas Corp. Ltd, the executives said, asking not to be identified. The Economic Times reported last week that the government could consider selling a 5-10% stake in ONGC for as much as `35,000 crore. Reuters cited an unnamed oil ministry official in a report on Tuesday and said the government could sell 5% in the oil explorer. That will be worth almost `18,000 crore at the current share price of ONGC.
“The thinking in the government is that since ONGC will fetch a large sum, it should go first, followed by SAIL,” one senior executive at SAIL said. “The SAIL share sale could happen sometime in September.”
The government expects to raise `58,425 crore from divesting part of its stake in state-owned firms, according to the budget presented by finance minister Arun Jaitley in Parliament last week. The number is critical to the government’s efforts of keeping the fiscal deficit for the year down to 4.1% of GDP, a target it may still miss according to analysts.
The first executive added that the decision on the floor price will be taken by the government.
“Retail investors may get a 5% discount.”
A second executive said roadshows are to be held in Hong Kong, Singapore, London, Boston and New York, probably at least one location in West Asia and Mumbai and Chennai.
The company did not respond to a questionnaire sent on Monday seeking details.
“The market sentiment is right so it would be good to quickly launch it before things change,” said a fund manager in an Indian mutual fund, who spoke on condition of anonymity.
“Metals are still weak, but the investors’ appetite in the domestic and overseas markets is good,” he said.
Last March, the government planned to sell 10.82% stake in SAIL, but the size of the share sale was reduced due to weak market conditions and the government ended up selling 5.82% for `1,514 crore.
Since the OFS planned for this year is being seen as a continuation of last year’s plan, the bankers to the issue are likely to be the same as in 2013, said the first executive. SBI Capital Markets, Axis Bank, J.P. Morgan, Deutsche Bank and HSBC Securities Services were the bankers to last year’s issue.
An equity analyst said the focus of the new government on infrastructure spending will help the OFS.
“SAIL is going to be the immediate beneficiary as infrastructure and manufacturing sectors pick up. We are already seeing infrastructure firms rushing to raise money, an indication that the sector outlook is improving. SAIL’s issue should get a robust response from investors as it is also upgrading itself and entering into new sectors,” said Samir Bahl, head of investment banking at Anand Rathi Financial Services Ltd.
In the next couple of months, a lot of liquidity will be sucked up by infrastructure and financial services firms and therefore it would make sense for SAIL to launch its issue right away, he added.
After the OFS, the government’s stake in SAIL will fall to 75%, in line with stock market regulator Securities and Exchange Board of India’s requirement.
SAIL is India’s oldest steel company with five integrated steel plants that collectively have a capacity of 16.62mt of steel. It is India’s second largest steel producer after Tata Steel Ltd.
SAIL closed on BSE at `84.85, up 1.68% from the previous day, while the Sensex ended at 25,228.65 points, up 0.69% from the previous day.
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