IDBI Capital has won the mandate to manage the initial public offer (IPO) of National Building Construction Corp Ltd (NBCC). Most of the other bankers were not willing to match the low fee it quoted.
Last month, the department of disinvestment had called for bids to appoint two merchant bankers for the issue. The government selects bankers through a two stage-process of technical and financial bids. According to the rules, other bidders have to match the fee quoted by the lowest bidder (L1). Last week, 10 domestic banks applied for the mandate, of which 8 qualified in the technical round.
According to sources, IDBI quoted the lowest fee of around Rs 2 crore, including the expenses and therefore, was top in the financial bids. “Most of the banks which qualified in the technical bids had quoted around Rs 5 crore. IDBI’s bid caught them offguard. None of them were ready to match the bid, as that was not enough to even cover expenses,” said a banker involved in the process.
“At Rs 2 crore, you will not be able to meet even the issue expenses. Who wants to make losses in this kind of market on a small issue?” he added.
However, negotiations are on and the issue can be sorted out if Enam Securities agrees to match IDBI’s quotes, said another banker. “It appears that Enam may match the bid. They are likely to get the mandate,” he said. IDBI and Enam officials were not available for comments.
“Enam was second on the list of financial bids. If Enam had declined to match the price quoted by IDBI, then the mandate for the second banker would have been offered to the others on the list,” sources said.
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The Bidders include Kotak Mahindra Capital Co, Intensive Fiscal, YES Bank, Avendus, Edelweiss capital, ICICI Securities, ENAM securities, IDBI Capital, SBI and JM Financial.
Foreign banks have stayed away from the issue, owing to its size, said bankers. “Banks take up PSU mandates primarily for league tables, as there is not much to expect on the fee side.
Here, the small size means it’s not going to affect league tables that’s why most foreign banks are not interested,” said a senior banker who applied for the issue.
The central government plans to raise Rs 250-300 crore through the IPO by divesting 10 per cent in the company.