Core Group Clears Scaled-Down Mtnl Issue

The core group on disinvestment yesterday gave the green signal to Mahanagar Tele-phone Nigam Ltds GDR issue, but pruned the the public offering by 40 million shares on the advice of the global coordinators.

The original proposal envisaged an initial public offering (IPO) of 60 million shares and the sale of 40 million shares held by the government. While there is no change in the proposed sale of government shares, the IPO component has been scaled down to 20 million shares, with a greenshoe option of 10 million shares.

The roadshows will be kicked off on November 18 and the pricing finalised in London between December 2 and 4. The team will first visit Hong Kong, then travel to the US and finally to London.

Sources said the duration of the roadshows has been reduced to two weeks, against the normal three weeks. It is a known scrip and sufficiently liquid, unlike the GAIL scrip, an official said.

Sources close to the lead managers revealed that they expected MTNL to get a fair price, which will be close to the ruling market price of Rs 225-230. The joint global coordinators to the MTNL issue are Goldman Sachs, HSBC Capi-tal Markets and Merrill Lynch.

The core group, which is headed by cabinet secretary TSR Sub-ramaniam, took its decision after being assured yesterday by the pre-survey team and the lead managers that demand prospects for the scrip were good. Prospective investors reportedly told the survey team that MTNL was a sound scrip and they were aware that the company was going to operate in a competitive environment. However, the investors sought more concrete proposals instead of mere plans. They also pointed out that the capital expenditure projection did not merit a big IPO. Accordingly, the lead managers advised the company to scale down its IPO from 60 million to 20 million shares.

The MTNL issue had come under a cloud after the government withdrew the GAIL offering in the face of poor investor demand. The core group, which had met on Tuesday to take stock of the situation, had decided to take a decision only after the return of the pre-survey team.