In a development that is likely to delay the follow-on public offer (FPO) of Steel Authority of India Ltd. (SAIL), the Union Government on Monday questioned the business ethics of four leading investment banks in accepting the job of managing Tata Steel's FPO when they are already empanelled for state-owned SAIL's FPO.
SBI Caps, Kotak Mahindra, Deutsche Bank and HSBC were hired as the book running lead managers (BRLMs) for SAIL's FPO in September, 2010. This was before Tata Steel reached an agreement with the four banks to manage its over Rs.3,000-crore FPO, scheduled to open from January 19.
Terming the action of banks as ‘unethical', Union Steel Minister Virbhadra Singh said the development might cause some delay for SAIL FPO hitting the capital market. “We are unhappy about it. I don't know if the banks can do like this. Certainly, this is unethical,'' Mr. Singh told reporters at the global steel summit here.
Official sources said notices had been sent to the banks on the issue of conflict of interest and they had asked to file a reply. Only after their reply a decision would be taken on the issue.
SAIL had plans to raise Rs.8,000 crore in the current fiscal by selling a 5 per cent stake. The government will also sell an equal share in the first phase of the FPO sale, which is likely in February.
“We engaged the merchant bankers first. Why the Tatas chose to come on the same time with same merchant bankers is for them to explain, it is for the banks to explain,'' Mr. Singh said. He said SAIL Chairman C. S. Verma, the Steel Ministry and the Department of Disinvestment were looking into the issue.
In September, 2010, SAIL had appointed six bankers to manage its FPO.