With its share prices hitting a 52-week low on Monday, Steel Authority of India's (SAIL) follow-on-public (FPO) offer has been put on hold. It is believed that the hostile market situation forced the Government to put the issue on the backburner.
The FPO was expected to hit the market last fiscal but was rescheduled citing administrative reasons. It was rescheduled to open on June 14 this year but was postponed again.
Confirming the update, SAIL Chairman, Mr C.S. Verma, told
SAIL's FPO will consist of diluting five per cent of Government equity and issuance of five per cent fresh share. There will be another round of FPO with the same proportion.
Earlier, the company was expecting to mobilise nearly Rs 8,000 crore. However, with the current market price of Rs 117.85 (as on closing price of BSE on Monday), the realisation will be much smaller.
Ever since the FPO was announced, SAIL's stock price has been sliding. BSE data shows that its share price came down from as high as Rs 234.10 on October 7, 2010 to as low as Rs 116.10 during trading hour on Monday.
Since this FPO is planned to bring in money not just for the Government but also for the company, will new development impact its capex plan? The company Chairman does not think so. “We have a comfortable bank balance and net worth position. Our net worth as on date is about Rs 38,000 crore. By leveraging these, the potential for borrowing is there,” added Mr Verma.