Mtnl Gdr Issue Likely To Be Oversubscribed

The response from foreign investors for the MTNL GDR, the last leg of the road shows of which are on in the European markets, suggest that the issue will be oversubscribed.

Despite the political storm brewing, the issue is set to sail through smoothly, sources say. "There will be no coming back from this stage,'' a source said. The UK leg of the tour includes road shows in London, Paris and Amsterdam.

In view of the suspected price hammering of the MTNL scrip at the local bourses by foreign institutional investors, the domestic institutions came in a way to support the prices. According to sources, in the past one month (commencing November 1), the domestic institutions, including the Unit Trust of India, LIC, GIC and State Bank of India (SBI), has purchased nearly 21.54 lakh shares in the local bourses.

This support by the domestic institutions have come at a crucial time when the price of the scrip was looking southward. With the pricing of the GDR to be decided on December 3, efforts were on to see that the price of the scrip does not fall below Rs 220.

Among the four major institutions that lend support, UTI was most active, and it purchased over 19.38 lakh shares of MTNL. On the other hand, LIC purchased 91,000 shares, GIC 78,000 and SBI 47,000 shares respectively.

Despite these efforts, the share price of MTNL has tumbled by over 7.8 per cent at the Bombay Stock Exchange (BSE) since November 3. While it was quoting at Rs 248.50 on the BSE on November 3, it has slumped to Rs 229 on November 28. During the same period, the Sensex has fallen by just over 6.08 per cent.

The current equity holding structure in MTNL has the government holding 65.7 per cent. Domestic financial institutions hold 16.1 per cent, foreign institutional investors hold 15.8 per cent, and the balance 2.4 per cent is held by Indian banks, mutual funds and the public.

While the markets have been witnessing a gradual fall since the end of October, the fate of MTNL global depository receipt was hanging fire.

However, the lead managers to the issue - Goldman Sachs, HSBC Capital Markets and Merrill Lynch - have expressed confidence that the issue will easily sail through.

The share price has been hovering in the range of Rs 220 since early November, down from a high of Rs 275.50 on July 30, 1997. The 21.54 lakh shares purchased by the domestic institutions forms one per cent of the total free float, which is approximately 20.4 crore.

The scrip closed at Rs 229 after touching Rs 237.25 at the BSE during intra-day trading yesterday.