Valuation row holds up Binani IPO

Apr 11, 2007
Ashish Rukhaiyar
MUMBAI

THE initial public offering (IPO) of Binani Cements is hanging fire over valuation differences between the lead manager (ICICI Securities) and JP Morgan Special Situations Asia Corporation, which is offloading a part of its holding in the cement company through an offer for sale.

According to sources close to the development, JP Morgan Special Situations, a wholly-owned subsidiary of JP Morgan Chase, is keen on a price of around Rs 125 per share, which is not acceptable to the lead managers, I Sec. The JP Morgan arm is offloading 2.05 crore shares, or 10.09% stake, in the company, through the IPO. The entity, through its subsidiary JP Morgan Special Situations (Mauritius), holds a 25% stake in the company.

Sources say that the merchant bankers are not comfortable with a price of Rs 125 per share due to a change in market sentiment and investor outlook. However, the bankers declined any such differences over pricing. “There are no differences regarding the pricing of the issue,” said an official with ICICI Securities. There is uncertainty in the market, especially in the cement sector, but, hopefully, the issue will open in the next few weeks, he added.

The draft offer document for the issue was filed in November last year, and the market regulator has already issued some observations. In fact, this is the second time that the document has been filed with the Securities and Exchange Board of India (Sebi).

Since the observations have been issued by Sebi, the merchant bankers now have less than three months to open the issue. Merchant bankers, however, refused to comment about the observations made by the regulator.

Sources say that since this is the second time that the document has been filed, the bankers may fix a price band of Rs 100 to Rs 110 per share and go ahead with the issue. At a price of Rs 120 per share, JP Morgan will be able to net Rs 246 crore, and still hold nearly 15% in the company.

JP Morgan had acquired the 25% stake in the company in September 2005 by purchasing equity from Binani Industries at Rs 24 per share. JP Morgan officials refused to comment on the issue.

Meanwhile, the company has formed a committee of directors to decide on the price band and the timing of the forthcoming issue. An e-mail query sent to the company remained unanswered till the time of going to press.

Incidentally, JP Morgan is not the only foreign equity holder in the cement company. In July 2006, Ganesha Prime Holdings (Mauritius) acquired a stake in the company by purchasing its existing equity from BIL for Rs 150 crore.