The liquidity crunch at the domestic markets and growing political uncertainty affected sentiment, leading to a slide in prices in the domestic markets.
The SBI GDR was priced at $14.15 per unit, with each GDR equivalent to two shares. The pricing, at a premium of 5.12 per cent, was done on the basis of the last day's price average at the BSE.
There was much drama just prior to the pricing of the State Bank GDR and deliberations were underway to ensure that the bank managed to get the right price in a depressed market. Sources close to the lead managers said doubts had been raised as to whether the timing for the issue was right and whether the issue should have been priced on October 3 at all.
SBI decided not to exercise its $50-million greenshoe option fully on the grounds of the ceiling being touched for the 20 per cent foreign holding in the equity of the bank, according to the existing regulations. The issue was finally oversubscribed more than two times.
Marketmen, however, raised doubts over the method in which pricing was carried out. They contend that if the last five days' average price at the BSE was taken as the basis, the premium for the issue would work out to be a mere 0.31 per cent and if the last three days were taken as the average, the premium would be at just around 2 per cent.
It is argued that the SBI pricing was merely a window dressing to keep the investor community happy. The local markets, however, continued to witness hectic selling pressure during the past week, as the scrip fell to close at Rs 228 at the BSE, by the end of the week.
The scrip had already fallen by 9.3 per cent since roadshows commenced on September 20. According to a dealer at a leading Mumbai-based securities firm, over 15 million shares have been sold at the local markets over the past two weeks.
On listing, at the London markets, the GDR witnessed appreciation with keen FII interest pulling up the price to $14.50-$14.70, up 5 per cent over the issue price.
Even while the action was on in the SBI stock, the government granted in-principle clearance to BPL Cellular Holdings Ltd for its proposal to tap the global markets through an American Depositary Receipt (ADR).
With this issue, slated at $200 million, BPL Cellular is expected to be the first Indian corporate to move in for an ADR. Another telecom giant, Hutchison Max, is also planning to tap the markets through an ADR in the coming months, marketmen say.
The Skindia GDR index touched its all time low of 61.18 on September 27, while the DSP GDR valuation index touched the 52-week low of 76.79 on Monday last. During the week only 7 GDRs gained, 46 lost ground and nine remained unchanged in comparison with 6 gainers, 55 losers and one remaining unchanged at the local markets.
The large number of losers at the local markets (compared with that at the Indian GDR markets) resulted in the premiums gaining marginally last week, even while the market conditions remained depressed. The index moved down from 93.29 on September 26 to 61.27 on October 3. The premium for the issues rose marginally from 12.40 per cent to 12.84 per cent within the same period.
The top gainers were Garden Silk, which moved from $2.25 to $2.50, while ITC rose from $9.50 to $10.25 and Gujarat Ambuja from $9.25 to $9.75. Of the 62 GDR offerings, 55 were trading at a premium on October 3.
