SAIL may defer FPO over ‘conflict of interest’ issue

State-owned Steel Authority of India Ltd has called off investor road shows for its planned follow-on public offer to raise Rs6,500 crore, apparently because the steel ministry sees a conflict of interest issue among banks handling the issue.

The scrapping of the investor meets scheduled this week may lead to the government falling short of raising its targeted Rs40,000 crore from sale of shares in state-owned companies. However, the cancellation does not mean that shares sale will not happen.

The government may strip off the mandates to SBI Capital Markets, HSBC, Deutsche Bank and Kotak Mahindra Capital for their involvement in the Rs3,500-crore follow-on share sale of Tata Steel, SAIL's biggest rival.

The government last week pulled up the four investment banks for taking up the management of Tata Steel's FPO at a time when they were already mandated to do the same work for SAIL. This is being interpreted by the government and the public sector undertaking as a conflict of interest.
(See: Government sees conflict of interest in Tata Steel, SAIL FPOs)

SAIL has already sent show-cause notices to these banks, asking them to explain their position. ''The letter has been sent after consultations with the steel and disinvestment ministries. It has been a collective decision, as the government feels strongly about the conflict of interests here,'' a report said.

SAIL chairman C S Verma refused to comment. But sources in SAIL said their concern stemmed from the fact that the SAIL issue would come after Tata Steel's and the ''common bankers should see that the issue does not suffer''.