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VSNL divestment held back

The offering may now be launched either towards the end of the year or early next year, officials indicated.

VSNL had initially thought of launching the flotation in September with the

T O D A Y

• Die Hard: VSNL lives! • Divestment delayed • Low TAR promise • The Alcatel plan

aim of having a widespread retail investor base. The proposed issue, aggregating Rs 620 million to the domestic retail investors, was cleared earlier by the cabinet of ministers at a price of Rs 900 per share, signalling a discount of 10 per cent to the company's GDR pricing of Rs 1,000.

However, the price of the VSNL scrip has been heading southwards since July after reaching a high of Rs 1,300 in May. During August, the scrip whose average trading volumes are low, was quoted at Rs 900. The downtrend continued in September with the share price sliding to a low of Rs 775 on September 24 before recovering to Rs 840 on September 29, going by the last traded price.

Unlike the Mahanagar Telephone Nigam Limited, whose free float is high, the VSNL counter has been marked by fairly low volumes. The number of shareholders of the company is marginally over 300, as marked by institutional investors.

According to officials hawking the shares of the telecom company, an issue now would defeat the purpose of having a widespread investor base. Of the equity offering, a minimum of 50 per cent has been year-marked for allotment to small investors. With the downturn in the price of the VSNL scrip, officials reckon there could be a resistance from retail investors.

The government's aim of making the issue a success and to emulate the method of divesting shares in top state-owned companies at a discount to the market price may be jeopardised if the retail investors do not participate actively, they pointed out.

Selling the shares in the domestic market should not pose a problem otherwise as institutional investors are willing to pick up large chunks.

Besides the scrip's slide, officials say that there would be a lag in conversion of the face value of the VSNL scrip from Rs 100 to Rs 10. There have been delays in making this operational. The splitting of the face value of the shares is expected to help impart more liquidity to the company's scrip. Dematerialising the scrip at the NSDL is also expected to take some more time.

The VSNL float has been approved by the Securities and Exchange Board of India, the market regulator. There have been not major observations in the draft prospectus which is valid for one year and therefore launching the issue at a short notice when the scrip price moves up should not be too difficult, officials claim.

The company has also not sought any exemptions from the regulator and has fulfilled all the disclosure norms.

- Compiled from the Indian media

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