NBCC effect, norms for I-bankers to be relaxed

NEW DELHI: Investment bankers have sought dilution of norms governing their appointment for managing the share sales in state-controlled firms, saying the guidelines announced last month would effectively debar all of them.

The government had banned bankers managing public sector floats from simultaneously handling offers of private firms in the same sector to avoid any conflict of interest. It had also restrained the bankers from advising any company in similar areas until the state-owned enterprise's disinvestment process was complete.

The government's contention was that a private firm's share sale ahead of a state-run firm operating in the same sector would affect the success of the later issue.

After the guidelines were released, some prominent investment bankers had refused to manage the stock sale of National Buildings Construction Corporation Ltd (NBCC) citing conflict of interest. The government had invited bids from investment bankers for NBCC, which were supposed to close Thursday.

But owing to poor response from the bankers, the finance ministry was forced to extend the deadline until June 10. "We have asked them (investment bankers) to share the information in a transparent manner," said a senior finance ministry official, adding that bankers will have to disclose if they are working with any private company in the same sector. "This does not mean that the norms will be changed. We are looking to work out this issue." NBCC is engaged in real estate, construction, and infrastructure development.

Majority of prominent bankers, including Indian and foreign, already have mandates from private companies engaged in one of these areas, said the chief executive of a leading investment bank on condition of anonymity. The government had changed the norms for appointment of merchant bankers following a controversy over same bankers handling issues by state-run steelmaker SAIL and private sector rival Tata Steel.

The government deferred the.`8,000 crore SAIL follow-on offer that was planned for January. Four bankers handling the SAIL issue - SBI Capital, Desutsche Equities, HSBC Securities and Kotak Mahindra - were engaged by Tata Steel to manage an issue. The new norms have put the Department of Disinvestment in a bind.

"Most of the bankers are already advising companies engaged in one of these areas. They will have to disclose all existing mandates in (the expression of interest) for NBCC given the existing guidelines," a government official said.

"The completion of public offering is a function of market condition, some of the mandates from private, or even from state-run companies, get prolonged due to poor market condition," said another person involved in the process.

Source: EconomicTimes