Considering the volatile market conditions, the Rs 2,500-crore initial public offering (IPO) of Rashtriya Ispat Nigam Ltd (RINL) has been delayed by at least three weeks. This is because merchant bankers, UBS Securities India and Deutsche Equities (India), have advised the early-July launch of the issue may not yield desired results.
“The RINL IPO has been delayed by three weeks. Merchant bankers for the issue have stated that due to volatile market conditions, the time is not conducive for the issue to hit the market. All proposed roadshows have also been deferred,” a source in the government said. The department of disinvestment is yet to communicate a fresh time-line to the company.
RINL is the second-largest state-run steel maker in the country, producing three million tonnes per annum (mtpa) at its lone facility at Visakhapatnam. The capacity is being raised to 6.3 mtpa in the current financial year.
The RINL issue was slated to hit the domestic market on July 3 and kick-start the ambitious disinvestment plan of the government for the current financial year. The postponement of the issue is a bad start to the Rs 30,000-crore disinvestment target the government had set.
The success of the issue on the domestic bourses is critical, as the government is looking to line up a slew of share issues to bring down the fiscal deficit. UBS Securities India and Deutsche Equities (India) had suggested delaying the launch, hoping the strengthening rupee and softening crude oil prices would help pull up the domestic market.
The Bombay Stock Exchange benchmark Sensex has dipped 13 per cent since February 21 for a variety of reasons, including higher interest rates and poor economic conditions in the backdrop of policy paralysis. The metal index also witnessed a drastic fall during the same period.
In line with the earlier schedule, RINL had filed a draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (Sebi) on May 18. Overseas roadshows to woo investors were to start from June 21. “The objects of the offer is to carry out disinvestment of 488,984,620 equity shares by the selling shareholder and to achieve the benefits of listing the equity shares on the stock exchanges. Our company will not receive any proceeds from the offer. All proceeds will go to the selling shareholder,” RINL said in the DRHP.
In January, the Cabinet Committee on Economic Affairs had approved disinvestment in RINL. The government aims to raise Rs 2,500 crore by divesting 10 per cent stake out of its 100 per cent holding in the company. The proposed share sale would also help RINL retain its Navratna status, which it was accorded on November 16, 2010, subject to the condition that it gets listed in two years (from the date of acquiring the status).