Bharat could raise $208m from 'Public Issue'

Vol 6, PW 17 (23 Oct 02) Midstream & Downstream

WITHIN SIX MONTHS of cabinet approval, Bharat Petroleum will hit the primary equity market.

On offer will be 50 crore shares at a face value of Rs1plus an attractive premium of, for example, Rs19 per share. At this price, Bharat will be able to raise about Rs1, 000cr ($208m).

We are told this is only an indicative figure. The issue price, the amount to be raised and the premium on the face value will depend on the timing of the issue and prevailing market conditions.

But whyreduce the face value of Bharat shares from their current Rs10 to Rs1 "To attract larger public participation," we learn. "Investors in a public issue will have to subscribe to a minimum of 100 shares under market rules.

If you take an issue price of Rs200 per share at the current face value this will mean a minimum investment of at least Rs20, 000 ($416). This might put off many small investors." Hence a decision to dilute the value of the share from Rs10 to Rs1 per share.

Bharat's paid-up capital will increase from Rs300cr ($62.5m) to ($72m) after the sale of 50 crore shares to the public. Simultaneously, the value of existing Bharat shares will have to be reduced from Rs10 to Rs1.

Our source stresses thatplans for a 'Public Issue' do not in any way conflict with the proposed "strategic sale" of the company. "One is independent of the other and the public issue is not meant to replace a strategic sale."