HSBC Holdings Plc and Deutsche Bank AG are among four banks that may be replaced as arrangers for Steel Authority of India Ltd.’s share sale after they agreed to work for a rival, Steel Minister Virbhadra Singh said.
Steel Authority, the nation’s second-largest producer, may delay the offer if it decides to hire new advisers, Singh told reporters yesterday in New Delhi. Kotak Mahindra Capital Co. and SBI Capital Markets Ltd. were also among the banks appointed by state-run Steel Authority in September who agreed to manage Mumbai-based Tata Steel Ltd.’s sale this month.
Losing the mandate for what may be the second-biggest sale in an Indian state-run company for the year to March 31 would hamper the banks’ efforts to narrow the gap with Citigroup Inc. in arranging equity offerings in the nation. Steel Authority, which plans to raise as much as 80 billion rupees ($1.8 billion) by March 31, will compete with a 35 billion rupee sale from Tata.
“It’s unethical,” Singh said. The government will ask the four advisers why they agreed to manage the larger rival’s sale, he said. “If this entails changing of bankers, then the FPO will be delayed.”
Steel Authority, based in New Delhi, plans to sell a 5 percent stake in the first phase of its secondary sale, with the government offering an equal share, according to an exchange filing in April. The offering is likely to be held by the middle of February, Chairman C.S. Verma said in a CNBC-TV18 interview on Jan. 10. Tata Steel’s sale is scheduled to begin Jan. 19.
“There is no conflict on SAIL to the best of our judgment and belief,” Uday Kotak, vice chairman of Kotak Mahindra Bank Ltd., said in Mumbai today. Kotak Mahindra Capital is a unit of the Mumbai-based lender.
SBI Capital Managing Director S. Vishvanathan, Rajesh Joshi, a spokesman for HSBC in Mumbai, and Deutsche Bank’s Mumbai-based spokesman Linus Chettiar declined to comment.
Government shares sales including an initial public offering of Coal India Ltd. and a stake in Power Grid Corp. of India Ltd. accounted for almost half of the record 1.07 trillion rupees raised from equity offerings in India last year, underscoring the importance for banks’ league table credit.
Kotak Mahindra Capital, based in Mumbai, ranked No. 1 in managing state share sales in 2010, followed by New York-based Citigroup and Mumbai-based ICICI Securities Ltd., according to data compiled by Bloomberg. Citigroup topped the rankings for all share sales in India, the data show.
Delaying the Steel Authority sale may also be a setback for Prime Minister Manmohan Singh’s administration, which has raised about half its asset sale target for the year ending March 31.
Shares of Steel Authority, which last week posted a worse- than-expected 34 percent drop in third-quarter profit, declined 2.6 percent to 157.15 rupees, its lowest level since Nov. 3, 2009, at the 3:30 p.m. close of trading in Mumbai. The benchmark Sensitive index rose 0.1 percent.
Indian steelmakers are raising funds to add capacity as increasing disposable incomes in the world’s second-fastest growing major economy lift demand for homes, cars and appliances as well as roads, ports and bridges. Local demand for the alloy is forecast by the government to grow 10 percent by March 31.
Tata Steel, India’s biggest producer, plans to sell about 57 million shares for 594 rupees to 610 rupees each in its second share sale since July.
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