How HSBC beat BNP for the IBP mandate

Vol 4, PW 23 (20 Dec 00) People & Policy
     

We already know the government has selected HSBC Securities and Capital Markets to oversee the disinvestment of its stake in state-owned petrol retailer IBP Petroleum, which owns 1,500 petrol pumps across India.

Now Petrowatch can reveal why HSBC was selected over its nearest rival BNP Paribas of France. A source tells this report that HSBC was selected during a meeting of the government's specially set-up 'Inter-Ministerial Group' on December 8th because its consultation fee was half that of BNP.

It seems BNP was asking for 1.26% of the sale proceeds, while HSBC was asking for only 0.65%. We know also that the government is determined to proceed with the sale of IBP Petroleum and is committed to pay HSBC a 'Drop Dead' fee (Sic) of around $40,000 if it cancels the disinvestment mid-way.

We can also confirm that the Indian government has asked HSBC to evaluate IBP's 61.8% equity stake in Balmer Lawrie & Co, which is to be sold prior to the divestment. This month HSBC and BNP topped a list of 12 bankers to apply for the IBP mandate, and were the only two asked to submit financial bids.

In a landmark decision on 6th October, India's cabinet agreed to sell the governments 33.59% stake in IBP through international global bidding. The government will retain a 26% stake in IBP.