Mtnl Gdr Priced At Rs 235; Issue Oversubscribed Thrice

The Mahanagar Telephone Nigam Ltd (MTNL) global depository receipt offering yesterday defied the prevailing political uncertainty to close at a sale price of Rs 235 per share. This price is at a 1.18 per cent premium on yesterdays closing price of Rs 232 on the Bombay Stock Exchange.

The state-controlled telecom corporation will exercise the greenshoe option of 10-million fresh shares in the coming days, MTNL chairman and managing director S Rajagopalan told Business Standard in an exclusive interview. The offering includes a tranche of 40 million government-owned shares and a fresh issue of 20 million shares, besides the greenshoe option.

 

Each MTNL GDR, which represents two shares, was priced at $11.958 using a benchmark of Rs 39.216 to a dollar. The gross proceeds of the 60-million shares offering amount to $358.74 million (a little over Rs 1,400 crore), making it the third largest GDR issue from India.

The entire money will come into the country in one tranche, Rajagopalan said. Exercising the greenshoe option could fetch MTNL another $60 million (Rs 235 crore) in addition to the $120 million (Rs 470 crore) it has mopped up through the issue of 20 million shares.

Telecom secretary A V Gokak told newspersons in New Delhi that the issue had been oversubscribed more than thrice. There were applications totalling $1.2 billion. A majority of investors were quality investors and geographical spread was to our satisfaction, he said.

Rajagopalan added, We received (requests from) tier-1 rated investors which gave us flexibility during allocations. Both he and Gokak refused to name the investors or funds..

Trading in London, which was scheduled to start at 2.30 pm GMT was slightly delayed after the allocation meeting (to decide the distribution of number of shares between different applicants) the MTNL brass and global coordinators stretched on longer than scheduled. The coordinators to the issue are Goldman Sachs, Merrill Lynch and HSBC Capital Markets.

The decision to price the GDR at a 1.18 per cent premium to yesterdays domestic closing price surprised some investors in London since it is higher than what most people were expecting. Gokak explained: Considering the fluid conditions (in India), we decided that a 10-day average would be okay (to use as a benchmark). On the 10-day average price, the price of Rs 235 represents a 4.3 per cent premium.

However, the post-issue performance of the MTNL issue remains uncertain with some investors grumbling that it was priced at the top end. There are particular worries that investors will lose out if the rupee moves downward slightly. There is not a lot left on the table. From the investors point of view, he could lose money right away if the rupee moves slightly (downward), a London banker said. But the risk of further depreciation has been lessened by the rupees recent plunge.

Other investors felt differently and said the deal had gone off smoothly because the government took a more flexible approach to the issue.

Said one: Investors liked the company. The governments decision not to set a reserve price ensured that the deal went through.

The government holding in MTNL after the issue will decline to 57.16 per cent on the expanded equity from the present holding of 65.73 per cent. The companys share capital has increased 3.33 per cent to Rs 620 crore with the fresh issue of 20 million shares. MTNL earned a net profit of Rs 780 crore during 1996-97 on a turnover of Rs 4,050 crore.

The MTNL scrip touched Rs 240.75 during intra-day trading on the BSE yesterday. About 9.05 lakh MTNL shares changed hands on the BSE and 10.99 lakh shares on the National Stock Exchange.

Investment bankers yesterday welcomed the success of Mahanagar Telephone Nigam Ltds GDR as a harbinger of glad tidings for other GDR offerings in the pipeline.

The price of Rs 235 for the MTNL deal is no doubt a good deal ... it reinforces the belief that quality companies will do well, a senior official at global investment bank Kleinwort Benson said.

CS First Boston director K R Bharat said, It is a very positive sign considering the political situation. The market believes that regardless of what happens in politics, liberalisation is here to stay. It also means good news for Indian Oil Corp and Gas Authority of India.

GAILs $700 million GDR issue was deferred last month following the volatility in global markets. IOCs $700 million GDR issues is set to be launched in early February, sources said. This is expected to be followed by a $200 million Concor offering. - Our Financial Bureau