Govt puts SAIL, RINL share sale on hold

The government today said it had put on hold the share sale of Steel Authority of India (SAIL) amid volatility in the stock markets, while disinvestment in Rashtriya Ispat Nigam (RINL) will take place after its Rs 12,500 crore first phase expansion, likely in the next six months.

The FPO of Maharatna SAIL, in which the government holds a little over 85% stake, is already much-delayed, while the IPO of RINL, in which the government plans to divest its 10% stake, was planned for January-March quarter of the fiscal.

"It is [SAIL FPO] not advisable now seeing the market... It is impossible to price a share ... Stability in the stock market is not there," Steel Secretary PK Misra said.

On being asked whether the FPO [follow on public offer] is possible this fiscal, Misra reiterated, "It will depend on market condition...How fast the market improves."

SAIL's FPO has failed to meet deadlines repeatedly since December, 2010, due to several reasons, like rising coking coal prices and problems with merchant bankers, besides adverse market conditions.

In July, Steel Minister Beni Prasad Verma had said the follow-on-public offer (FPO) of the state-run steel giant may take place around Diwali.

Through the share sale, the government will divest a 5% stake in SAIL, while the company will issue fresh equity in the same proportion under the FPO.

The government's disinvestment target for the previous fiscal also got hit due to the delay in SAIL's share sale. It could only raise over Rs 22,000 crore against a target of mopping up Rs 40,000 crore through divestment in PSUs.

As far as RINL's disinvestment is concerned, Steel Secretary Misra said, "It will first go for restructuring of capital, which will take not less than six months."

The move aims at improving valuation of the company after it completes the Rs 12,500-crore first phase expansion.

The company has already initiated the IPO process and appointed four merchant bankers --UBS Securities, Deutsche Bank, Edelweiss Capital and IDBI Capital-- as the book running lead managers (BRLMs) to manage its issue.

The second largest steel PSU has embarked upon a major capacity expansion drive to have a capacity of 11.5 million tonne per annum by 2015-16 at an investment of Rs 45,000 crore, to be completed in three phases.

Adverse market conditions have also played spoilsport for the government, as so far, it has only managed to mop up around Rs 1,100 crore this fiscal from the sale of 5% equity in Power Finance Corporation, which was the first follow-on public offer of a PSU in the current fiscal.

Shares of SAIL closed at Rs 108.80 on the BSE, up 4.72% from the previous close.