The government has directed merchant bankers to submit a full list of their prospective investors in the forthcoming global depository receipts (GDR) issue of Mahanagar Telephone Nigam Ltd (MTNL).
The Centre also wants the investors to be graded to determine who among them will retain the shares for some time and who will exit immediately on listing.
It is somewhat unusual for merchant bankers to make available a graded list of potential investors. But we now realise that it is a good idea because the grading system will also help us divide the total earnings among merchant bankers, lead and co-lead managers, Amit Ghose, director, equity capital markets, HSBC Investment Banking, told Business Standard.
In view of our stock prices falling, we would like to know the kind of investors who take a long range view of the stock. We are trying to determine investors in terms of tiers I, II and III. We would also like to know who are the large, medium and small investors and who will remain with us for some time, MTNL chairman S Rajagopalan said.
Many of the names are already available. FIIs constitute 17 per cent of our current investors and we have regular interaction with them, he added.
The three merchant bankers selected to lead manage the issue HSBC Investment Banking, DSP-Merrill Lynch, Kotak-Goldman Sachs are expected to submit the list of investors as part of their marketing plan. The plans will be put together to churn out an investment theme which encompasses the key selling points.
Each of the bankers will assign a rating of, say, A, -A, B or -B, to different investors based on the quality of the investor. The grading will come handy at the time of allocation of shares because the issue managers expect it to be oversubscribed two or three times over.
A major chunk of the shares will be allocated to grade A investors. Thus, the merchant banker or co-lead manager who comes up with the largest number of grade A shares stands to earn the largest amount of commission, sources explained.
Besides the three merchant bankers, four to six other investment banks will be appointed as co-lead managers and another six-ten of them will be appointed as co-managers. The three merchant bankers performing as lead managers are expected to tap investors for 65-70 per cent of the issue size and the rest will go to co-lead managers and co-managers.
The lead managers said the value of MTNL shares on an as is basis is around Rs 280 which is close to the market price of the shares that are already available in the market.
At present, 34 per cent of the MTNL shares are in the market.
The lead managers have also made suggestions which, if implemented, will improve the perception of MTNL shares and, thus, enhance its value by the time the road shows begin.
