IPCL float: Rs 170/shr, 5% retail discount

Reliance offered 5% stake at minimum Rs 195 a share.

The government yesterday set a floor price of Rs 170 per share for the sale its 33.95 per cent residual stake in IPCL.

Retail investors will get a 5 per cent discount on the final offer price, which will be determined by the book-building process. There will be no lock-in period.

Reliance Industries, which holds 46 per cent in IPCL, has been offered another 5 per cent stake at a minimum price of Rs 195 per share.

Disinvestment ministry sources said the government expected to mop up at least Rs 1,250 crore through the offer, which will open on Friday.

Disinvestment Minister Arun Shourie told reporters that the discount to retail investors should not be seen as a precedent.

The government would decide on the discount for other issues on merit, he said, adding that the move should not be seen as a pre-election sop. Retail investors across the world are given an 8-10 per cent discount in such offerings.

The minister said Reliance was confident of picking up the issue even at Rs 195 a share. In case it did not pick up the shares, the 5 per cent earmarked equity would be sold to the public, he added.

The company has been given three working days to respond. Reliance had in 2002 bought a 26 per cent stake in IPCL from the government for Rs 1,491 crore, at Rs 231 a share.

The price bands for offloading the government's residual equity in IBP and CMC would be finalised by Saturday, Shourie said.

The government proposes to offer shares of six PSUs to the public before the end of this fiscal. The roadshows for IPCL and CMC were flagged off yesterday in Mumbai, while that for Gail will begin on Friday.

The IPCL scrip surged 6.40 per cent to close at Rs 191.90 on the Bombay Stock Exchange today, with 2.20 million shares traded. In the futures segment, the stock was quoted at a modest premium of Rs 92.70.

"The floor price of Rs 170 is attractive for retail investors. Considering a general band of 10-15 per cent, the offer will not be at a huge discount for other investors," Jigar Shah, head of research at brokerage firm KRC, said.

Disinvestment Secretary Dhirendra Singh, who met Finance Minister Jaswant Singh earlier in the day to decide on the floor price, said the upper limit would be set after the offer closed.

Of the 33.95 per cent stake on offer, about 5 per cent will be given to employees at a third of the offer price, with a lock-in period of three years.

More sops for small investors

The government has introduced yet another retail investor-friendly measure in the proposed IPCL issue.

It has said in the bid document that in case of any upward revision in the band price, the investor will not be required to pay more than what he has paid at the time of application.

The number of shares given to him will be reduced to reflect the higher cut-off price, but no other demand will be raised.

"In the case of IPCL, if the cut-off price is higher than what he has bid for, retail investors will not need to pay anything extra. This will be adjusted in the number of shares he receives," Ambreesh Baliga, vice-president, Karvy Stock Broking, said.

The move can be seen in the context of the differential pricing announced for public sector stock offerings slated in the next few weeks.