Many investment bankers lost the race to manage the coming National Thermal Power Corporation (NTPC) share sale after the Department of Disinvestment (DoD) introduced an additional criterion for the selection. The department has sought a commitment’ from these bankers on the minimum shares they would sell to investors in the NTPC offer for sale (OFS), through which the government plans to raise Rs 13,000 crore.
Though the commitment’ was verbal, few bankers were willing to take the risk, as they weren’t sure of the repercussions if they failed to fulfill the promise, said two people in the know. “Nobody knows the fallout if a banker is unwilling to bring in the amount of money committed. The worry is would the bankers be blacklisted informally?” asked a banker familiar with the matter, adding, “But this has helped the DoD finalise the bankers.” This was the first time DoD had included commitment’ as a selection criterion, the banker said.
Sources said Deutsche Bank, Goldman Sachs, Citi, Kotak Mahindra Capital and SBI Capital had been shortlisted to manage the NTPC issue, which could be the largest OFS so far, after the one by Oil and Natural Gas Corporation (ONGC). Earlier, reports said 11 bankers were in the race.
|A DIFFERENT BALL GAME
- Some bankers fear being blacklisted informally if they fail to meet the commitment
- The government is keen on a commitment as the NTPC issue’s success is vital to meeting the 2012-13 disinvestment target
- Deutsche Bank, Goldman Sachs, Citi, Kotak Mahindra Capital and SBI Capital shortlisted to manage the NTPC OFS
However, it couldn’t be independently verified from those who secured the mandate whether they had given separate commitments’ to DoD to bring the money.
Bankers said they were sceptical about giving a commitment to DoD, as they were unsure about the pricing of the NTPC OFS. “If the pricing is aggressive, commitments would never work because investors are too finicky about pricing. But a bank with internal resources can afford to make a commitment,” said another banker privy to the matter.
Through the ONGC OFS last financial year, the government had raised about Rs 12,800 crore. However, the issue wasn’t considered a success, as it had been bailed out by last-minute subscriptions by Life Insurance Corporation and state-run banks. Bankers said the NMDC OFS issue was “aggressively priced”, adding it had sailed through because of “attractive pricing”.
For the NTPC OFS, the government didn’t want to take a chance, as the success of this issue was key to meeting this financial year’s disinvestment target of Rs 30,000 crore, said one of the bankers, citing this as the reason why the government had included the commitment’ aspect. Through stake sales in NMDC and Hindustan Copper, the government has met only a fifth of its disinvestment mop-up target.
Though the government doesn’t pay intermediaries for managing the issues of its companies, bankers usually jostle to be managers for these mega offerings to ensure a top spot in the league tables.