Gail Proposes $900m Gdr Issue, Cabinet Decision Today
The international offering of Gas Authority of India Ltd (GAIL) is set to become the countrys largest-ever GDR offering. Sources said the government plans to divest 25 per cent, or 210 million shares, of its equity holding in the company, which is one of Indias `navratna public sector undertakings. This will reduce the governments current stake of 96.8 per cent to 71.8 per cent.
The international offering is being pegged at nearly 180 million shares, which works out to $850-900 million, based on the current market price of Rs 179-180 at the major bourses, including the National Stock Exchange and the Delhi Stock Exchange. The domestic offering is proposed to be around 30 million shares.
The record for the largest GDR offering by an Indian company is currently held by Videsh Sanchar Nigam Ltd (VSNL). The telecom PSU had mopped up $528 million, including the greenshoe portion, in March 1997.
The core group of secretaries approved the GAIL divestment proposal earlier this week, while the Union cabinet is set to review the proposal today. The GAIL GDR will be launched in the last quarter of 1997, said sources. The government had earlier divested 26.7 million GAIL shares at an average price of Rs 67 per share in 1994. The shares were sold largely to Indian mutual funds.
The process of appointing lead managers for the GAIL GDR will commence next month, following cabinet clearance for the proposal, sources said. Leading foreign institutional investors (FIIs) and domestic investment bankers have already commenced preparatory work in the form of internal study reports.
The GAIL stock gained listing at the major bourses in February-March 1997, and has since moved steadily from an initial listing price of Rs 98. GAIL has emerged as one of the favourite PSU stocks for several FIIs, with several analysts placing it as a key long-term stock.
However, market circles feel that the large divestment planned for fiscal 1997 may dampen the stocks performance at the markets in the short term.
GAIL, Indias primary natural gas distribution company, was formed in the mid-80s as a 100 per cent government-owned PSU. It has gained priority in the governments current divestment programme. However, the government intends to hold a sizeable controlling stake in the company in the long term.
According to reports, GAILs current gas pipeline network extends over more than 3,000 km. Although GAIL does not hold a legal monopoly in the gas transportation business, the ownership of comprehensive infrastructure puts it effectively in a monopoly situation.