The government yesterday withdrew the $500-700 million Gas Authority of India Ltd global depository receipts issue in the face of continued turbulence in the international stockmarkets. The government will revive the GDR issue at a later date, and is now exploring the possibility of a domestic issue in the near future.
According to investment bankers in London, there is little chance of the GDR issue being revived before January at the earliest.
Government officials said the stockmarket turmoil took its toll as the offer price came in well below the preferred price band of Rs 125-150. The lead managers to the issue were Morgan Stanley, Jardine Fleming and BZW.
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Prospective buyers have demanded deep discounts and the government felt that the sale could not go ahead on these terms, said a person close to the deal. Market talk is that buyers were willing to purchase the GDR at around Rs 90.
Meanwhile, finance secretary Montek Singh Ahluwalia said it was too early to take a view on the forthcoming Mahanagar Telephone Nigam Ltd GDR issue. The MTNL issues pricing is slated to be fixed on December 6.
Briefing newsmen in the capital yesterday, finance secretary Montek Singh Ahluwalia said the government had also requested the global coordinators to explore the possibility of a suitable disinvestment of GAIL in the domestic market in the near future.
Quoting from the resolution of the core group on disinvestment, the secretary said, This decision regarding GAIL will not affect the timing of other proposed disinvestments which are proceeding on schedule. The MTNL issue was to be followed by Concor in January and Indian Oil Corporation in February.
Conceding that putting off the GAIL issue would be a setback to achieving the Rs 7,000 crore disinvestment target in 1997-98, the finance secretary said, To the extent that we would have been that much closer to the target if the issue had gone through.
However, Ahluwalia maintained that the postponement would not have an adverse impact on the fiscal deficit. GAIL is a very recent change.
All I can say is that presently we are not in any difficulty and the fiscal deficit targets are on course, he said. In the same vein, revenue secretary N K Singh said there was no undue cause for alarm on revenue receipts.
According to the finance secretary, the government was still weighing its options on GAIL and may eventually go ahead with a domestic issue. We can give the benefit to the domestic investors. One way of improving sentiments is to ensure adequate supply of quality scrips. And GAIL will fit the bill, Ahluwalia said.
Revenue secretary N K Singh said this decision would be subject to the companys views as it would set a low benchmark and future issues would result in lower receipts.
Discussing the GDRs withdrawal, market sources said the lead managers had suggested book-building at Rs 110.
The lead managers reportedly told the government that under the present conditions, it was not possible to build the book at Rs 125.
This was unacceptable to the government. The lead managers, however, insist they were able to find buyers within the price range.
The postponement caused considerable confusion in London, where the lead managers were scheduled to meet the governments core group on disinvestment yesterday. On Tuesday, a government spokeswoman had said the issue would go ahead as scheduled. This was echoed by Morgan Stanleys Naina Lal Kidwai.
However, the postponement did not surprise several analysts, who pointed out that GAIL has been fluctuating wildly on the National Stock Exchange.
At one point yesterday, GAIL touched Rs 122, below the reserve price fixed by the government for the sale.
Analysts in London say the issue was hit by a combination of factors. Topmost is the swiftly changing market conditions in the wake of the South East Asia crisis.
The fallout from Hong Kong has led to an increase in the price of risk in emerging markets, said Deep Lalani of Astaire & Partners.
GAILs share price has fluctuated sharply in the last few months, which also scared international investors.
It hit a high of Rs 190 on August 13. However, a few months earlier, it had touched a low of Rs 105 in April.
GAILs share price was hovering around Rs 160 just before the roadshows began.
The government left a considerable margin, but did not anticipate that the price would fall to current levels.