Selloff game: SAIL follow-on offer next

NEW DELHI: As part of its disinvestment programme, the government is considering a two-phase follow-on public offer (FPO) of Steel Authority of India Ltd (SAIL), a move that is expected to fetch it over Rs 8,000 crore at current share prices.

The 20% FPO would comprise a 5% divestment of government equity and SAIL issuing fresh equity of another 5% in each phase, after which the government���s stake in the navratna company would fall to 68% from 85% now.
The SAIL scrip was over 4% up at Rs 194.74 on the BSE on Monday.

A senior steel ministry official confirmed the move, saying, ���A proposal in this regard has been finalised by us and will be sent to the company board for approval.��� Another official told PTI that steel minister Virbhadra Singh has already approved the proposal, which has also got in-principle approval of the Disinvestment Department of the finance ministry.

While the timing of the FPO is yet to be decided, the official who asked not to be named said the first phase may happen as early as next January.

SAIL manufactures over 14 million tonnes of hot metal annually and is ramping up its facility with an investment of Rs 70,000 crore to hike its capacity to about 24 million tonnes by 2012. SAIL is likely to use the FPO money to part-fund the expansion programme.

The company funded its expansion through internal accruals till 2008-09. SAIL plans to borrow close to Rs 6,000 crore this financial year to fund its over Rs 10,000-crore capital expenditure programme. The follow-on-public offer is issue of additional equity to investors.

The amount raised by the government would go to National Investment Fund created mainly to finance social sector programmes. As the FPO is mix of the government���s stake and issue of fresh equity by the company, the share of the Centre and firm will be Rs 4,000 crore each.