The Hindu Business Line : Simultaneous domestic, ADR offering in BPCL proposed

THE Inter-Ministerial Group (IMG) has decided to sell 20 per cent Government equity in Bharat Petroleum Corporation Ltd (BPCL) in the American markets through an American Depository Receipt (ADR). Simultaneously, a sale of 15 per cent has been mooted in the domestic markets, senior Ministry of Disinvestment (MoD) officials have said.

This decision sets the mandate for bankers to quote to the MoD for their advisory services in implementing the Government sell-off of 35 per cent of its stake in BPCL, in line with a Cabinet decision on Republic Day.

The IMG is a panel comprising the nodal ministry (in this case Petroleum), the Finance Ministry and the MoD, which operationalises the Cabinet's decision on disinvestment of public sector undertakings.

In a meeting held on Thursday, the IMG decided that the issue of simultaneously entering both the domestic and American markets would be referred to the Securities and Exchange Board of India (SEBI). At a market price of around Rs 210 per share, both the issues together amount to around $410 million (around Rs 2,000 crore). The decision to time both issues simultaneously is aimed at averting a controversy on the pricing of the issues in the two markets.

According to senior MoD officials, some degree of flexibility might be allowed in determining the exact quantum of equity to be sold in the domestic and American markets. This is because since the sale would be undertaken through a `book building' process, the consequent price discovery, or the price that the market is willing to pay for the stock, will also reveal the appetite of the markets.

In the case of disinvestment of National Aluminium Company Ltd (Nalco), prior to sale of the company to a strategic partner, the MoD was planning sale of 10 per cent equity in the domestic markets to be followed up by a 20 per cent ADR offering, before a political storm involving resistance from the factory workers backed by the Orissa State derailed the sell-off process.

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