VSNL to drop local book building

One of the lead managers to the VSNL issue said that the uniform book building exercise for the domestic and the GDR issue adopted for the issue is discouraging investors to go in for the issue. "The domestic investors are not interested to subscribe to the issue as they are looking for a higher discounted price," he said.

The VSNL GDR further fell to a low of $ 9.63 registering a net decline of 2.78 over Monday’s close. On the contrary its underlying stock recovered by 1.43 per cent to close at Rs 710 on the local bourses. The recovery according to market observers is on account of the hugediscount at which the underlying stock is quoting against its GDR. The VSNL GDR is quoted at a premium of 15.12 per cent to its underlying stock price. (Two GDRs = One Equity).

It may be recalled that since the first day of the road show (January 27) the market value of the GDR has been steadily declining. The GDR has seen a fall from $ 10.63 levels to trade at $ 9.63 on Tuesday.

According to sources, big institutions like ICICI, IDBI, LIC, GIC, UTI are not showing any interest to subscribe to the issue. "It seems, this time the pressure tactics of the Centre is not having any impact on the institutions as they are not interested to take any further losses into their books," said a source closely tracking the issue.

Shanti Ekambaram, executive director, Kotak Mahindra Capital Company, refused to comment on the issue. She said, “I would not like to make any comment on the ongoing issue at this point of time."

The issue has managed to garner more than $ 70 million as against the targeted $ 400million.

Investors are not interested to subscribe to the VSNL issue as they feel that it will go the Gas Authority of India (Gail) way even though the issue was made available to the domestic investor at a discount of around 2 per cent. Investors have lost confidence as they are not certain which way the price will move in the domestic market after the closure of the issue. The domestic institutional investors who subscribed to the Gail issue were hit hard after the closure of the issue as the price of the share came down to Rs 58.70 as against the issue price of Rs 60 per share. "Investors do not want to take the price risk again," said a merchant banker closely tracking the disinvestment proceedings.

GAIL shares on Monday dipped even below the battered-down placement price of the share at Rs 60 per share last week. Gail share price closed at Rs 58.70 after touching a low of Rs 58.15 at the Bombay Stock Exchange. The scrip has witnessed a steady fall since May, 1998 from Rs 124 levels. The governmentalso had a tough time placing the share with institutions quoting much lower than the expected rate and quantity. Most of the subscription was made by state run banks and financial institutions, with State Bank of India leading the list by subscribing to 58.28 lakh shares out of over 3 crore shares that were subscribed.