Govt May Have To Prune Vsnl, Gail Gdrs Gdr Issues May Be Cut

The government may have to prune the size of proposed GDR offerings of Gas Authority of India Ltd (GAIL), Videsh Sanchar Nigam Ltd (VSNL) and Concor in face of reduced demand from investors following the Moody's lowering of India's sovereign rating.

Investment bankers also felt that pricing of the three PSU GDR issues along with that of Indian Oil Corporation (IOC) could come under a cloud after the Moody's downgrade. This will put pressure on the Rs 5,000 crore disinvestment target of the government unless the rupee depreciates to an extent to make up the shortfall.

Sources said the Moody's action would make US funds and investors wary of Indian equity and the impact would be felt most in the government's disinvestment programme in GDR markets since these funds typically constitute some 30-40 per cent of offers.

 

Consequent to reduced US demand, the government may have to reduce the size of the proposed offerings. Said an investment banker, "As it is, the Asian market is in doldrums. Now, with this (Moody's downgrade), the US investor is going to be difficult to please. There is no way that the European market can fill the void created by the US investors. Pricing is going to be tricky."

Tepid interest in Asian stocks among fund-managers has already forced the government to clip the size of IOC's initial public offering-cum-GDR. The government was reportedly advised by lead managers, Goldman Sachs and CS First Boston, to drop IOC's plans for a 19.5-million shares IPO since an excess floatation may dampen the price.

Besides the proposed IOC offering, GAIL plans to hit the market with 200 million shares and Concor and VSNL with 10 million shares each. Current market prices translate into potential issue sizes of Rs 1,900 crore for IOC, Rs 1,800 crore for GAIL, Rs 1,000 crore for VSNL and Rs 450 crore for Concor.

The government stands to garner Rs 5,150 crore from these. But since most GDR issues are priced at a slight discount, this target may fall further.

"With the US market getting extremely choosy, even this may be a little difficult to achieve. Besides, we are going past the first quarter of this fiscal year and haven't even started work," a government official said.