The Hindu : Floor price announced for IBP, CMC

Online edition of India's National Newspaper
Sunday, Feb 22, 2004

Business

Business

Floor price announced for IBP, CMC

By Our Special Correspondent

NEW DELHI, FEB. 21. The Government today announced a floor prices of Rs. 620 per share and Rs. 475 per share for sale of residual equity in IBP and CMC respectively. The two companies that had been taken over by strategic partners, the Indian Oil Corporation and the Tatas are among the six companies where government equity is being sold in the market over the next few weeks in a bid to achieve the revenue mobilisation target for disinvestment in the current fiscal.

Disclosing the floor prices after obtaining approval from the Union Finance Minister, Jaswant Singh, the Disinvestment Secretary, Dhirendra Singh, said a 5 per cent discount for retail investors in the two initial public offers on the same lines as had been allowed for IPCL. The offer for IBP and CMC would open on February 23, he said.

In the case of IOC and CMC, however, the Government has not offered additional equity in the IPO to the two strategic partners of IBP and CMC respectively. This is in contrast to IPCL where Reliance Industries was offered 5 per cent additional equity to raise its stake to 51 per cent.

The floor price for IBP in the current IPO at Rs. 620 is substantially lower than the Rs. 1,551 a share paid by IOC for acquiring 33.6 per cent sharedholding in the company.

It is lower, however, than the market price of Rs. 715.50 for IBP shares. In the case of CMC, the floor price is higher than the Rs. 197 per share paid by Tata Sons but again it is considerably lower than the current market price of Rs. 541.90 for the company's shares.

Mr. Singh said the Government is following the same principle as in the IPCL case by going for a fixed floor price instead of a price band. The Government will sell 26.2 per cent equity or 39.76 lakh shares in CMC and 26 per cent equity or 57.58 lakh shares in IBP.

He said the retail bidders for both companies would be allowed a 5 per cent differential lower price compared to the offer price established for qualified institutional buyers and non-institutional bidders, through the book building route. The CMC public offer would open on February 23 and close on February 28, in the case of IBP the issue would open on February 23 and close on March 1.

IPCL was the first of the six public issues to open but will now be followed by Dredging Corporation of India, Oil and Natural Gas Corporation and Gas Authority of India Limited.

The divestment of Government equity in these companies is expected to help achieve the target of Rs. 13,200 crores of revenue mobilisation during 2003-04.

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