Considering volatile market conditions, the Rs 2,500-crore initial offer of Rashtriya Ispat Nigam (RINL) has been delayed by at least three weeks on advice of merchant bankers UBS Securities India and Deutsche Equities (India) that early July launch of the issue may not yield desired results.
"The RINL IPO has been delayed by three weeks. Merchant bankers for the issue have stated the government that time is not conducive now for the issue to hit the market due to the volatile market conditions. All proposed roadshows have also been deferred," a source in the government told PTI.
A top company official said the pre-marketing roadshows, which were to be started with Mumbai from today, have been cancelled for the time being, but department of disinvestment is yet to communicate the company any fresh time-line.
The RINL issue, was slated to hit the domestic market on July 3 and kick-start the ambitious disinvestment process of the government for the current fiscal. The postponement of the issue is a bad start to the Rs 30,000 crore
disinvestment target that the government has set for the current fiscal.
"Merachant bankers are of the view that attempting the issue amidst the volatile conditions would not result in getting strong reception for the transaction," he said.
The successful journey of the issue in domestic bourses was critical for the government to line up other issues to meet the Rs 30,000 crore target and aim to bring down the widening fiscal deficit.
The two merchant bankers of the issue -- UBS Securities, India and Deutsche Equities (India) -- have recently suggested the government to delay the launching of the issue by three weeks with the hope that the domestic market would look up by then with the strengthening of rupee and softening of crude oil prices.
The BSE 30-share benchmark Sensex has dipped over 13% since February 21 on a volley ofreasons including higher interest rates and poor showing of the economy in the backdrop of policy paralysis. The metal index also witnessed drastic fall during the same period.
In line with the earlier schedule, RINL had filed draft red herring prospectus (DRHP) with the market regulator SEBI on May 18 and overseas roadshows to woo investors were to start from June 21.
"The objects of the offer are to carry out disinvestment of 488,984,620 equity shares by the selling shareholder and to achieve the benefits of listing the equity shares on the stock exchanges. Our company will not receive any proceeds from the offer and all proceeds shall go to the selling shareholder," RINL said in the DRHP.
The Cabinet Committee on Economic Affairs in January had approved disinvestment in RINL. The government aims to raise Rs 2,500 crore by divesting 10% stake out of its 100% holding in the company.