New Delhi: The government is believed to have fixed Rs 66 per share as the floor price for selling 5.82 percent stake in SAIL, truncating its original plan to offload 10.82 percent in the steel major on poor market conditions.
The issue, scheduled for Friday through offer for sale (OFS) route, will be second disinvestment this month where the government has truncated issue size fearing that adverse market conditions may not help it realise original targets.
Last week, the government had pruned the issue size of Nalco to 5 percent plus an option to retain an equal number in case of over-subscription. Finally, it garnered about Rs 628 crore by selling its 6 percent stake in the company.
The SAIL issue would fetch the exchequer about Rs 1,587 crore at Rs 66 apiece, if subscribed fully.
Official sources said the Empowered Group of Ministers (EGoM), which met in the morning, decided to fix the floor price of SAIL OFS at Rs 66 per share, which was 2.17 percent higher than its Tuesday closing price.
However, it trimmed the offer size to 5.82 percent against the original plan of 10.82 percent stake sale due to opposition from the Steel Ministry, the parent ministry of the Steel Authority of India.
Citing poor market conditions, the ministry argued that current price of SAIL scrip does not reflect its true value. After this, the EGoM decided to scale down the size to 5.82 percent, the sources said, adding that rest of the stake sale can happen in the next fiscal.
SAIL shares are already trading at 4-year low level and have not been part of recent market rally. The scrip has gone down by 32 percent between April 1, 2012 and today, when it closed at Rs 65.05 on the BSE. During the intra-day trade, the stock had touched 4-year low of Rs 64.05.
The offer will take place through a separate window on both, BSE and NSE between 9:15 am and 3:30 pm.
Besides, the markets have also lost some sheen in last few days due to political uncertainties at home as well as external factors.
The BSE 30-stock index, Sensex, has tanked by 3.51 percent or 686.25 points in last four sessions. It closed on Wednesday at 18,884.19 points, below the key 19,000 level for the first time in three weeks.
The SAIL issue, if subscribed fully, will also lead to government nearly meeting its revised disinvestment target of Rs 24,000 crore for the current fiscal, the highest ever realisation on disinvestment front in a single year.
The government has raised over Rs 22,300 crore so far by selling part of its stake in some PSUs, including NTPC, NMDC, Nalco, Rashtriya Chemicals and Fertilisers.
Meanwhile, in a filing to the stock exchanges, SAIL said that President of India - the promoter of the company - "proposes to sell up to equity shares of the 24,03,96,572 equity shares of the face value of Rs 10 each, representing 5.82 percent of the total paid up equity share capital of the company on March 22".
The government has already held roadshows in Singapore, Hong Kong, the US, the UK and continental Europe for the proposed SAIL disinvestment. The merchant bankers for SAIL share sale include SBI Caps, Kotak Mahindra and Deutsche Bank. After stake sale, the government's stake would come down to 80 percent.
For the third quarter ended December 31, 2012, SAIL reported a 23 percent decline in its net profit at Rs 484 crore mainly due to lower net sales realisation amid subdued market conditions.
The Cabinet Committee on Economic Affairs had in July last year approved 10.82 percent disinvestment in SAIL out of government's 85.82 percent stake, through the Offer of Sale (OFS) route.
However, it could not be taken forward amidst the subdued market conditions. The government has kept the issue on hold anticipating buoyancy in the market to return.