The government has shortlisted HSBC Holdings Plc, ICICI Securities, SBI Capital Markets and IDFC Capital to manage the public offering of state-run consultancy firm Engineers India Ltd.
"The four firms have been shortlisted from among 11 merchant bankers," a senior government official said. "They will be appointed once the Finance Minister approves it."
The shortlisted merchant bankers quoted "a very low" service fee for managing the sale of 10 per cent of the government's shareholding through a further or follow-on public offering (FPO), likely in mid-July, he said.
"It's almost for free... All I can tell you is that they will get sub-0.01 per cent of the total transaction value," he said.
At the current market price, the government is expected to raise about Rs 1,100-1,200 crore through sale of 10 per cent stake in EIL, which provides design and engineering services for petroleum, power and fertiliser companies.
Shares of Engineers India today closed 2.93 per cent higher at Rs 420.45 on the Bombay stock Exchange.
The government will select a legal counsel to manage the FPO by next week. Merchant bankers and legal counsel will then together file draft red herring prospectus (DRHP) for the FPO.
"We estimate the DRHP can be filed in three weeks from the date of appointment of legal counsel and it may take an equal time to get approval of (market regulator) SEBI," he said. "The FPO in all probability will hit the market in mid-July."
Besides HSBC, ICICI, SBI and IDFC, UBS AG, Kotak Mahindra Capital, Enam Securities and IDBI Capital Market Services, Avendus Capital, Edelweiss Capital and Centrum Broking were in fray for being appointed financial managers of the issue.
As a prelude to the divestment, EIL paid a 1,000 per cent (Rs 100 per share) special dividend totalling Rs 561.65 crore. Of this, the government, which holds 90.4 per cent equity, got Rs 507.65 crore plus a dividend tax of over Rs 96 crore.
He said the company will now issue two bonus shares for every one held and subsequently split the Rs 10 share into two of Rs 5 each. The process would be completed by the May-end.
Thereafter, the company will finalise audited accounts for 2009-10 fiscal before filing draft red herring prospectus for the follow-on public offering.
EIL, which had a cash reserve of Rs 1,320 crore as on March 31, 2009, has till date given Rs 600 crore in dividends to the government on a Rs 25 lakh share capital that formed the company in 1965.
EIL had reported a 67 per cent jump in net profit to Rs 310.65 crore in April-December period of the 2009-10 fiscal. Turnover had risen 20 per cent to Rs 1,353.46 crore.
