All the topline merchant bankers in the country have formally pitched for the mandate in the divestment programme of Rashtriya Chemicals Fertilisers.

The presentation was held on June 23 with nine contestants making the pitch.

Sources said some of the bigger ones are not that keen on bagging the mandate.

According to a merchant banker, there is not much money to be made out of government divestments. Besides, RCF lacks the glamour of some other public sector undertakings.

Among those known to be in the race are HSBC Securities, SBI Capital Markets, Rabo Bank and Lazard India.

RCF is one of the largest urea producing fertiliser companies, which is likely to be disinvested soon.

The department of divestment is expected to appoint an advisor for the divestment within the next seven days.

The government of India has put RCF on the fast track of divestment. On May 22, the government had announced its intentions of privatising RCF by offering a little over half (51 per cent) of its 92.5 per cent equity to a private company. The rest 7.5 per cent of the stake is with the public.

The DoD had invited expressions of interest in order to select an advisor till June 9.

Interested parties were asked to make presentations on June 23, thereafter an advisor is expected to be selected within one or two weeks. Due diligence is expected to start in the following two or three months.

A senior RCF official confirmed that the government was going to appoint an advisor soon. However, he said that the company was not aware of the players who are in the race to be the advisor.

It is understood that the divestment of RCF will take place after National Fertiliser is divested, where the bid price is expected to be out in Mid-July.

According to analysts, divestment of NFL would offer greater confidence for the smooth divestment of RCF. The pricing and interest in NFL would determine the business valuation for a fertiliser company such as RCF.

RCF is one of the largest fertiliser and chemical manufacturing companies in Asia and its cost of urea manufacturing is lower than the average cost of all companies in this category.

The company's Thal manufacturing plant's (classified under the pre-92 mixed feedstock) cost of manufacturing is Rs 6,500 a tonne against the group's average of Rs 7,085.

Similarly at the Trombay plant (classified under the pre-92 gas-based feedstock), the cost of production of urea is Rs 5,800 per tonne, against an average cost of Rs 6,200 per tonne.

"Being a low cost producer of urea will give the bidder an advantage and also over 55 per cent market share in Maharashtra," said one analyst from a domestic brokerage.

The latest report by ASK Raymond James said, "Financially, the company is not doing too well due to the price of urea being controlled. Because of the price control on fertilisers, RCF incurred a loss of Rs 48 lakh (Rs 4.8 million) in FY03 but made a profit of Rs 85.4 crore (Rs 854 million) in the second half of FY03. Hence, it would be valued low for business, as returns from its operations have not been adequate. We feel the valuation of the company could be spilt into two parts-business and property."

Analyst estimate Rs 157 per share as the valuation for the company. They also said  RCF's plant is quite old and not making attractive return and hence would fetch a lower price.