Jardine Pips Warburg In Race For Balco Deal

The controversy surrounding the Balco strategic sale programme appears to have subsided with the task force recommending Jardine Fleming as the global advisor, beating competition from European investment bank Warburg Dillion Read. This now awaits ratification from the core group, following which the mandate will be officially announced.

Sources say that until a few weeks back Warburg Dillion Read, the investment banking arm of the newly-merged bank UBS Ag, was said to have bagged the mandate. It is claimed, however, that Jardine Fleming stole a march over its rival and emerged the frontrunner after it submitted a fresh revised fee structure, quoting a favourable level.

 

The core group is expected to meet shortly on this issue, sources said.

A section of the inter-ministerial group had said that there should be a review of the selection for the Balco mandate prior to Jardine placing a revised fee structure.

The fee has been calculated as that percentage of the transaction as a success figure. Jardine Fleming officials remain tightlipped on the issue.

According to Roddy Sale, director, International Capital Markets, Jardine Fleming, "The government has not informed us officially about the decision on the mandate. It would, thus, be mere speculation for us to comment on this."

He also declined to comment on the government's divestment in the Balco offering. Investment banking sources are of the view that the Balco offering would be between $100-150 million.

According to sources, Jardine Fleming had not bagged any major mandate for the total Indian PSU disinvestment programme, baring the GAIL GDR.

With competition having increased substantially from European-based investment banks (and with little progress in the GAIL GDR timetable), Jardine Fleming has shown the acumen to get into a significant strategic sale deal, a source said.

A section of the investment banking community is of the view that the process of selection for global advisors, co-ordinators and lead managers should be "streamlined" as a similar set of problems has been faced in earlier disinvestment programmes of the government.

There is still no clarity yet on how much the government would be willing to divest finally in Balco.

While the inter-ministerial group had favoured the 51 per cent stake divestment, it would require the views of the entire committee.

Initially nine international and domestic merchant bankers showed interest in the Balco offering, including A F Ferguson, Crisil, ICICI and McKinsey. On the strategic sale programme, the Modern Foods mandate has gone to ANZ Grindlays, while the Kudremukh Iron Ore Company is learnt to have been bagged by Kleinwort Benson and SBI Capital Markets. The beauty parade for the ITDC mandate is expected to be held at the end of this month, sources said.