The government has relaxed the norms for hiring bankers in the upcoming public offering of National Buildings Construction Corporation Ltd. This comes after the earlier guideline barring I-bankers from managing a divestment candidate if they are involved in another IPO in the same sector, which has kept a number of merchant bankers away.
Analysts see this as a move to salvage the plans to see through the Rs 40,000 crore ($8.9 billion) disinvestment agenda to boost resources and manage public finance for this fiscal year.
In the revised request-for-proposal (RFP) from merchant bankers to manage the issue of the state-owned construction firm, the government has asked for a disclosure of any potential conflicts but does not bar the I-bankers from participating in the issue.
“The interested parties would also be required to submit a list of (transactions) or disclose any mandated transactions which are in the same line of business as that of the company (being disinvested)….,” according to the RFP for the issue.
“The Government/Company (being disinvested) shall at its sole discretion after providing due and reasonable opportunity decide whether such future conflict of interest shall materially adversely affect the interest of the Government and the Company (being disinvested) in relation to the transaction and shall be entitled to grant the consent to the Adviser to continue as Adviser or terminate the appointment of the Adviser,” it added.
The conflict of interest issue arose after four bankers (of the six), appointed for Steel Authority of India’s (SAIL) Rs 8,000 crore follow-on public offer, were also involved with the Rs 3,477 crore share offering by the private sector competitor Tata Steel earlier this year. These four banks were SBI Capital Markets, Kotak Mahindra, Deutsche Bank and HSBC while JP Morgan and Enam Securities did not work on Tata Steel’s issue.
SAIL’s issue has got delayed after the four I-bankers came under fire and has now been deferred.
The government, which holds a 100 per cent stake in NBCC, plans to sell 10 per cent in the public issue which is expected to raise around Rs 250 crore ($55 million). The deadline for submitting the bid for managing the issue has been extended to June 15, based on which the government will appoint two Book Running Lead Managers (BRLMs).
The earlier guidelines had made it impossible for top merchant banks, who were also advising other real estate issues, to bid for NBCC’s disinvestment. There are several pending IPOs of real estate firms.
To meet its tall disinvestment target, the government has already approved share sales in SAIL, Oil and Natural Gas Corp (ONGC) and Hindustan Copper. The government has been able to raise Rs 1,160 crore by shedding 5 per cent stake in Power Finance Corporation in May this year.