Retail lure: Only 10 per cent of Petronet float for QIBs

Petronet LNG Ltd (PLL) will allocate only 10 per cent of its initial public offering (IPO) of 26 crore shares to qualified institutional bidders (QIBs).

This is to ensure greater retail participation in the issue, which hit the market yesterday.

Under the Securities and Exchange Board of India (Sebi) guidelines, a company can offer up to 50 per cent of the issue size to QIBs, while the quotas for retail and non-institutional bidders have to be a minimum 25 per cent each.

Sources said the company, which comes under the ministry of petroleum and natural gas, would like to see greater retail participation.

Retail bidders have shied away from expensive offerings of public sector companies of late. For instance, 75 per cent of the applications submitted for IPCL came from foreign institutional investors (FIIs).

The soft pricing of the PLL issue in the band of Rs 13-15 was expected to increase retail participation. Domestic institutions normally dominate the QIB segment.

Their curtailment was expected to help the stock do well post listing. "There would be greater interest in the share following listing from both domestic and foreign institutions as they would be getting minor allocations through the primary float. FIs and FIIs will have to buy from the market, and this would help the stock post good gains," a company source said.

The equity base of PLL after the issue will be 75 crore shares with a face value of Rs 10. The promoters of PLL - Indian Oil Corporation, GAIL, ONGC and Bharat Petroleum Corporation - will hold 12.5 per cent each post issue.

Gaz de France International and Asian Development Bank have 10 per cent and 5.2 per cent stakes, respectively, in the company.

Meanwhile, Petronet is looking at an internal rate of return of 21 per cent in its first year of operation. In 2004-5, the company would be selling only 2.5 million tonne of LNG.

The IRR would go up to 29 per cent when it uses the full capacity of five million tonne.

Two of its promoter-companies plan to buy spot LNG in the international market and sell in through PLL in India in 2004-5. This is expected to raise PLL's the capacity utlisation in 2004-05.

Meantime, regassified LNG has started to flow out of PLL's Dahej terminal yesterday.