SAIL FPO likely to be deferred

The government is mulling deferring the follow-on public offering (FPO) of Steel Authority of India (SAIL) to the next fiscal on concerns over the stance of foreign institutional investors who have so far pulled out $1.7 billion this year from the market. The Sensex has lost around 11 per cent since January this year and recently was at the year's lowest of 17,263.

The issue was to open in early Feburary.

''Our expectation is that markets should be more stable. So the issue could also get pushed to next (financial) year,'' steel secretary P K Misra said on the sidelines of a steel summit in New Delhi yesterday.

According to analysts, it would be a challenge to launch both the ONGC and SAIL issues in March, right now with FIIs in sell mode. They add given the weak secondary market conditions, the government simply cannot afford to take any chances.

The ONGC issue, which will see the government sell 5 per cent of its stake, is slated for a 7 March, 2011 market opening.

Analysts say it is unlikely that the SAIL and ONGC issues would happen back to back. They add the ONGC FPO being a large sized issue, investors would need their refund to invest in SAIL. In November, a 5-per cent stake in ONGC was worth close to Rs15,000 crore and since then the stock has gone down by 19 per cent, a 5-per cent stake is now worth just under Rs12,000 crore.

Companies tend to avoid raising money in the last fortnight of March since investors are on the look out for tax savings instruments at the time. With the budget set for later this month, according to merchant bankers, there's too little time left to conduct roadshows and get the necessary paperwork out of the way even if these are fast-track issues.