RITES Ltd., the consulting arm of Indian Railways, is likely to defer its initial public offering, or IPO, because the government has yet to take a decision on how the shares will be priced for the market.
The issue needs to be closed before June 30, failing which the company will have to revalidate its financial results for the quarter ended March 2008 and seek a fresh approval from the stock market regulator.
The issue would be deferred not because of any adverse market conditions, but due to the lackadaisical attitude of the government, said a senior railway official who spoke on condition of anonymity.
After pricing is resolved, a public issue takes a minimum of 25 days to complete formalities such as printing of prospectus and forms and regulatory filings. That means if no decision is taken by June 5, it automatically results in deferring the issue
Any pricing decision has to be approved by a group of ministers, which has not met since it was set up to oversee the pricing of issues of state-owned companies. A meeting of the group was scheduled last week but was called off because some of its members were traveling.
When contacted, VK Singh, a director at the railway ministry handling RITES, refused to comment. “We are not supposed to talk to the media on such issue,” he said.
Through the forthcoming issue, the government planned to divest 4 million existing RITES shares and issue 10 million fresh shares. The total offering would amount to 28 per cent of the enhanced capital base of the company. After the issue, the government’s holding will come down to 28 per cent. Government officials and company executives, speaking on condition of anonymity, said the railway ministry, in consultation with investment bankers, had proposed to price the issue between Rs 175 and Rs 225 a share. At this price the company will be valued at Rs 1,125 crore.