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Saturday, October 13, 2012

The Government has once again gone down the wrong lane after taking the initial step. The IPO of Rastriya Ispat Nigam Limited (RINL) which was earlier expected to open from October 15, 2012 has been postponed for the third time now. Giving its reasoning for the deferral, the steel ministry said, "We will not sell RINL below book value". Currently, the book value of the PSU firm is pegged at Rs 22.52 a share. Sources close to the development said merchant bankers UBS Securities and Deutsche Equities (India) have proposed Rs 15-17 as the price band. In a statement to the media, the Government said press conference for the announcement has been postponed due to “unavoidable circumstances”

RINL is the second largest state-owned steel maker in the country producing three million tonnes per annum (mtpa) at its lone facility at Visakhapatnam. The capacity is being raised to 6.3 mtpa in the current fiscal. The government plans to sell 10 per cent of its stake. The issue was previously deferred twice since the filing of the draft prospectus with market regulator Sebi on May 18 due to reasons as varied as volatile market conditions and fire at the company's Vizag steel-making facility.

While the conditions of the market may not be perfectly ripe for IPOs, but deferring IPOs repeatedly the way the Government is doing, may only send out wrong signals. The department of heavy industries is still also not on board for the BHEL OFS and it is very likely that this may be deferred as well. Still more, the finance ministry is also likely to bring the National Fertiliser, RCF, EIL issues for cabinet approval in a bid to meet the Rs 30,000 crore divestment target. With such ambitions of divestment targets, it is only right to say that the Government should realize that no lunch is free and if it were to successfully clear IPOs, pricing issues attractively may be the only way out

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