VSNL GDR may be priced lower

MUMBAI, Feb 5: The Videsh Sanchar Nigam Ltd global depositary receipt GDR issue, set to be priced on February 11, is headed for a low s...

MUMBAI, Feb 5: The Videsh Sanchar Nigam Ltd global depositary receipt GDR issue, set to be priced on February 11, is headed for a low strike between a mere 8 to 10, estimated market sources familiar with trends on Friday even as the Skindia GDR index ended a gloomy week 30 points below last week8217;s closure.

The VSNL GDR dived a further 10 cents on international bourses, as with five days to go for the pricing of the fresh issue of GDRs, the merchant bankers found book-building heavy going. There were even unconfirmed reports of queries by Indian book-runners to London-based clients, in spite of there being a separate book for overseas buyers. This could not, however, be confirmed.

The VSNL GDR traded at 10.30 at 12 GMT on Friday. Since roadshows began on January 27, the GDR equivalent to two equity shares has been hammered, and has fallen as much as 4.45 per cent. Similarly, on the local front amidst thin volumes the stock is trading at Rs 730 levels against its high of Rs 770 registered during thelast week of January.

The merchant banking division of Kotak Mahindra, book runners for the Indian market, would meet the top officials of the Bombay Stock Exchange and the National Stock Exchange on Saturday February 6, where the book-building proceeds would be reported before finalising the price, said sources. The book-building is done at the local exchanges.

The VSNL disinvestment programme of 11 million shares now depends solely on the quot;price functionquot;, say market experts. The conclusion that the success of the programme now depends on the pricing of the issue is based on the supply and demand factors registered at the counter both at the local markets and the GDR markets.

Merchant banking sources say that if the pricing of the local GDR book, being run by Kotak Mahindra, is at a discount to the underlying domestic stock price, the issue would get a neat subscription of over 50 per cent.

The VSNL stock closed at Rs 740 on the NSE on February 5 with a meagre volume of 7,907 shares. No tradeswere registered on the BSE. The scrip was last traded on February 4 on the BSE at Rs 730.

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Similarly, sources at Bank of New York, the depository to the issue, suggest that if the pricing is done at a discount to the GDR price the lead managers would be comfortable garnering about 60-70 per cent of the target amount. The market was also agog with rumours that the local lead managers were finding it difficult to even place about 30 per cent of the issue, considering the problems they had to face while placing the shares of GAIL.

It may be recalled that of the 1.54 million shares of Gail reported on the BSE, about 40 per cent of the shares were picked by small PSU banks on the last day of the issue.

However, senior officials of the merchant banking division of Kotak Mahindra Finance were not available for comments.