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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF DISINVESTMENT
ENGAGEMENT
OF BOOK RUNNERS-CUM-LEAD MANAGERS (BRLMs) FOR DISINVESTMENT IN NATIONAL
MINERAL DEVELOPMENT CORPORATION LIMITED (NMDC) THROUGH OFFER FOR SALE
1. Introduction
1.1 National Mineral Development Corporation Limited (NMDC) is a public sector undertaking under the administrative control of the Ministry of Steel. NMDC is engaged in the exploration of wide range of minerals including iron ore, lime stone, diamond etc. NMDC is India's single largest iron ore producer and is presently operating three large mechanized iron ore mines in addition to operating the only mechanized diamond mine in the country, at Panna in Madhya Pradesh. The paid-up capital of the company as on 31.03.2005 is Rs.132.16 crore. The Government of India holds 98.384% equity of the company and the institutions, public and the employees hold the balance (1.616%). The shares of the company are listed on the stock exchanges in India.
2. Government decision
2.1 The Government of India (GOI) intends to disinvest out of its 98.384% equity shareholding in National Mineral Development Corporation Limited (NMDC), equity shares to the extent of 15% of NMDC’s equity through book building process in the domestic market. Expressions of Interest are invited, by 1730 Hrs. (IST) 15th February, 2006, from reputed merchant bankers/investment bankers, either singly or as a consortium, with specific expertise in disinvestment through capital market offerings to act as Book Runners-Cum-Lead Managers (BRLMs), to assist and advise the Government in this process.
3. Responsibilities of the Book Runners-Cum-Lead Managers (BRLMs)
3.1 The Book Runners-Cum-Lead Manager (BRLMs) would be required, inter alia, to undertake tasks related to all aspects of the offering, including but not restricted to: -
(i) Advising the Government on the timings and the modalities of the capital market offer
(ii) Ensuring best returns to the Government.
(iii) To advise and assist the Government in identification and selection of legal advisors, accountants, other intermediaries and coordinate their work under the guidance of the Government, complete due-diligence, draft offering documents, red herring prospectus, etc. for the issue.
(iv) Pre-market survey, road shows, book building and generation of interest amongst prospective investors.
(v) Undertaking market research along with pricing and allocation of shares and after sale support.
(vi) Guide and facilitate in obtaining necessary approvals, completion of regulatory requirements.
(vii) Performing all other responsibilities connected with such offerings.
(viii) Underwriting connected with the offering.
(ix) Undertaking the task of printing and distribution of stationery as per details given in Annexure I and to ensure that the stationery is printed in sufficient quantity and delivered to the centres well in advance.
3.2 Since it is desirable for Government to have two BRLMs, having adequate experience in similar offerings, Government would select two parties who together would form a team and will be called BRLMs. The BRLMs selected may have to form a syndicate including co-managers in consultation with the Government.
4. Submission of Expression of Interest
4.1 Reputed merchant bankers/investment bankers with adequate and specific expertise in disinvestment through capital market offering are invited to submit Expressions of Interest either singly or as a consortium for selection as Book Runners-Cum-Lead Managers (BRLMs) to Shri S.K.Bandyopadhyay, Deputy Secretary, Department of Disinvestment, Room No.204, II Floor, Block No.11, CGO Complex, New Delhi-110 003. The bidders would be required to deposit along with the Expression of Interest, a non-refundable earnest fee of INR 40,000 by way of a demand draft drawn in favour of ‘Pay and Accounts Officer, Ministry of Finance, Department of Disinvestment, New Delhi’ payable at Delhi. GOI reserves the sole right to accept or reject any or all Expressions of Interest without assigning any reasons therefor. Together with the Expression of Interest, the following details are to be sent:
(A) Background of the firm:-
(i) Full particulars of the constitution, ownership and main business activities of the prospective Book Runners-Cum-Lead Managers (BRLMs). In case of consortium bids, the particulars of the coordinating firm having the principal responsibility for the mandate as well as those of other partners may be furnished.
(ii) Unabridged Annual Reports or audited financial accounts for the last three years of all the partners.
(iii) Details of the pending litigation and contingent liabilities, if any, that could affect the performance of the bidder under the mandate, as also details of any past conviction and pending litigation against sponsors/partners, Directors etc., and any areas of possible conflicts of interest.
(iv) Details of Domestic issues managed as Lead Manager/Book Runner or Co-Lead Manager/Co-Book Runner, in respect of issue size of more than Rs.100 crore are to be furnished in the format given in Annexure-II.
(B) Understanding of the Company
Details of understanding and SWOT analysis of NMDC may be furnished.
(C) Experience and presence in India
A brief note evidencing the prospective Book Runners-Cum-Lead Managers (BRLMs) strength in India indicating the number and addresses of offices, manpower and investment, if any, in the Indian capital market as follows:
(a) Commitment to India, indicating net investment in Indian capital market
(b) The quality and quantity of presence in India with specific reference to research team
(c) Number and places of offices with address, manpower with the investment banking team.
(D) Broad Scheme for the issue
a) Optimal syndicate structure suggested to maximize quality and quantity of demand.
b) Proposal on syndicate incentivisation.
c) Strategy for pre-marketing.
d) Proposed Road Show venues and reasons for suggesting the same.
e) Commitment(s) which may act either as a constraint or as a conflicting interest to your involvement in the proposed issue
(E) Manpower commitment
Details of team who will be handling the proposed issue, their status in the organization, their background, qualification, experience and present addresses. An undertaking may also be given that if during the process, any of the team members is not available by way of resignation, etc. another person of the same qualification and experience would be made available after informing the Department of Disinvestment.
(F) Marketing and Demand Analysis
Details of the following should be furnished:
a) Equity sales and distribution capacity with demonstrated capability of selling Indian issues in particular, Asian equity and global equity along with distribution network.
b) Demand analysis as projected and details of sectors influencing demand.
c) Strategy for marketing shares and identification of target investor groups.
d) Identification of key selling points.
(G) Valuation Methodology
Details of the valuation methodology to be followed in determining the final pricing of the issue, indicating clearly the pricing level proposed to be underwritten.
(H) Quality of Research
Research strength in the country, sector, region, world based on rating as established by independent global surveys. Details should be given relating to research capabilities and experience and background of the research team.
(I) After-market support
Strength in lending after market support, with specific reference to Indian issues managed in the past.
(J) Underwriting capabilities
Underwriting capabilities including details of capital base of the Investment Bank available to support such underwriting, record of past underwriting commitments and experience. Also, the details of any of the underwriting commitments (including hard underwriting), which could not be met, may also be furnished.
(K) Time Schedule
A realistic time schedule for launching the proposed Domestic issue with complete break up of activities to be undertaken by various agencies involved in the issue.
4.2 All the information sought above, and any other additional information considered necessary by the bidder, should be sent, in 3 copies, maximum of 10 pages (font size 12) to the officer mentioned in para 4.1 as a part of the Expression of Interest (EOI).
5. Eligibility
5.1 Bidders should have had handled domestic equity issues in respect of issue size of more than Rs.100 crore in Book Building process.
5.2 Government of India has issued guidelines prescribing certain qualifications for Advisors for disinvestment process. A copy of the guidelines (OM No. 6/4/2001-DD-II dated 13th July, 2001) is enclosed (Annexure-III). The interested parties are requested to carefully go through the guidelines and after satisfying that they are qualified to act as BRLMs, furnish the following certificate as a part of the proposal/EOI.
“We certify that there has been no conviction by a Court of Law or indictment/adverse order by a regulatory authority for a grave offence against us or any of our sister concern. It is further certified that there is no investigation pending against us or our sister concern or the CEO, Directors/Managers / Employees of our concern or of our sister concern. It is certified that no conflict of interest exists as on date and if in future such a conflict of interest arises we will intimate the Government of India of the same.”
6. Presentation
6.1 Qualified interested parties would be required to make a presentation of their credentials and the proposed transaction, before an Inter-Ministerial Group (IMG) at New Delhi in the Committee Room of Department of Disinvestment, Room No.515, Block No.14, CGO Complex, New Delhi-110003. The exact date and time of the presentation will be intimated separately. The parties will be assessed broadly on the following criteria:
a) Experience and capabilities in handling similar transactions as Book Runners-cum-Lead Managers.
b) Sector expertise and experience.
c) Understanding of NMDC.
d) Deal team qualification and manpower commitment to the deal.
e) Marketing strategy and after market support.
f) Local presence and level of commitment to India.
g) Global presence and distribution capabilities.
h) Research capabilities.
6.2 Immediately after their presentation is over, the parties are required to hand over a sealed envelope containing the fee quotes mentioned in para 7 below to the Convener of the Inter-Ministerial-Group. The fee quoted should be unconditional and gross of all taxes.
7. Fee
7.1
The Book Runners-Cum-Lead Managers (BRLMs) will need to quote a fee for
the domestic issue as a percentage of disinvestment proceeds through domestic
offering in a sealed envelope. The
fees should also include the expenses for the printing and distribution of the stationery as defined in para 3.1 (ix) above. The fee quoted should be unconditional and gross of all taxes. A drop dead fee if any, payable in case Government abandons the offering at any stage after the process has been started by the Advisors, may also be indicated separately.
7.2 The bid should be unconditional. Expenditure on account of fees to legal/accounting or any other consultant appointed by GOI, should not be included in the financial bid. Expenses of Road Shows, conferences and travel, boarding and lodging, only of Government/NMDC officials will be borne by the Government. The Book Runners-Cum-Lead Managers (BRLMs) will, however, pay the travel related expenses and all the other expenses including those related to their due diligence, their road show expenses and pre-marketing expenses in connection with the offerings, expenses of legal counsels, accountants and other experts appointed by them for communication and for preparation of offering circular and prospectus, etc. The Book Runners-Cum-Lead Managers (BRLMs) will be liable to pay taxes for their professional services as per laws of the land.
8. Procedure for Selection of the Book Runners-Cum-Lead Managers (BRLMs)
8.1 Based on the Expression of Interest received from the interested parties, Government would request them to make a presentation before an Inter-Ministerial Group (IMG) constituted by Government.
8.2 The IMG would evaluate the parties based on their presentation and shortlist them for the purpose of opening their financial bids. The L1 party would be selected for the transaction and the L2 party would be required to match the fees quoted by L1. In case L2 does not accept the offer, Government will make the offer to L3 and the process will continue till Government appoints two Book Runners-Cum-Lead Managers.
8.3 The two Book Runners-Cum-Lead Managers (BRLMs) selected by Government would work as a team and both the selected Book Runners-Cum-Lead Managers (BRLMs) would be called Book Runners-Cum-Lead Managers. The two Book Runners-Cum-Lead Managers would share the aforesaid fees equally.
9.1 If any further clarification is needed about the assignment, the under-mentioned officer may be contacted.
Shri S.K.Bandyopadhyay
Deputy Secretary, Ministry of Finance (Department of Disinvestment )
II Floor, Block No.11, CGO Complex, Lodi Road
New Delhi - 110 003
Tel. 24368521
Fax 011-2436 6524
e-mail:ds_bando@nic.in
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Annexure I
STATIONERY FOR THE ISSUE OF NMDC
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Sr. |
Description |
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1 . |
DRAFT PRELIMINARY SALE DOCUMENT |
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2 . |
PRELIMINARY SALE DOCUMENT (ORDINARY & SPECIAL) |
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3. |
FINAL SALE DOCUMENT |
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4. |
BID CUM APPLICATION FORM with Memorandum in Book form (RESIDENT/NRI/EMPLOYEES) |
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5 . |
POSTERS/BANNERS |
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Annexure-II
Details of Domestic Issues
(Value Rs. in Crore)
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Parameters |
2001 No. of Mandates and Value |
2002 No. of Mandates and Value |
2003 No. of Mandates and Value |
2004 No. of Mandates and Value |
2005 No. of Mandates and value |
Total |
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INDIAN ISSUES
(a) Equity
(b) Debt Issues
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Issues pulled out/withdrawn pre or post road shows
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Note: Please indicate if you are engaged in any ongoing market transaction in the minerals/ metals sector.
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Department
of Disinvestment
Block
14, CGO Complex
New Delhi.
Dated
13th July, 2001.
OFFICE
MEMORANDUM
Subject:
Guidelines for qualification of Advisors for disinvestment process
Government has examined the issue of framing
comprehensive and transparent guidelines defining the criteria for selection of
Advisors, so that the parties selected through competitive bidding inspire
public confidence. Earlier, a set
of criteria like sector experience, knowledge, commitment etc. used to be
prescribed. Based on experience and in consultation with concerned departments,
Government has decided to prescribe the following additional criteria for the
qualification/disqualification of the parties to act as Advisors to the
Government for the disinvestment transactions:
(a) Any conviction by a Court of Law or indictment / adverse order by a
regulatory authority for a grave offence against the Advising concern or its
sister concern would constitute a disqualification. Grave offence would be defined to be of such a nature that it
outrages the moral sense of the community.
The decision in regard to the nature of offence would be taken on a
case-to-case basis after considering the facts of the case and relevant legal
principles by the Government. Similarly,
the decision in regard to the relationship between the sister concerns would be
taken, based on relevant facts and after examining whether the two concerns are
substantially controlled by the same person/persons.
(b)
In
case such a disqualification takes place, after the entity has already been appointed
as Advisor, the party would be under an obligation to withdraw voluntarily from
the disinvestment process, failing which the Government would have the liberty
to terminate the appointment / contract.
(c)
Disqualification
shall continue for a period that Government deems appropriate.
(d)
Any
entity, which is disqualified from participating in the disinvestment process,
would not be allowed to remain associated with it or get associated merely
because it has preferred an appeal against the order based on which it
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has
been disqualified. The mere
pendency of appeal will have no effect on the disqualification.
(e)
The
disqualification criteria would come into effect immediately and would apply to
all the Advisors already appointed by the Government for various disinvestment
transactions, which have not yet been completed.
(f)
Before disqualifying a concern, a Show Cause Notice why it should not
disqualified would be issued to it and it would be given an opportunity to
explain its position.
(g)
Henceforth, these criteria will be prescribed in the advertisements seeking
Expressions of Interest (EOI) from the interested parties to act as Advisor.
Further, the interested parties shall be required to provide with their
EOI an undertaking to the effect that no investigation by a regulatory authority
is pending against them. In case
any investigation is pending against the concern or its sister concern or
against the CEO or any of its Directors/Managers/Employees, full details of such
investigation including the name of the investigating agency, the charge/offence
for which the investigation has been launched, name and designation of persons
against whom the investigation has been launched and other relevant information
should be disclosed, to the satisfaction of the Government. For other criteria
also, similar undertaking will be obtained along with EOI.
They would also have to give an undertaking that if they are disqualified
as per the prescribed criteria, at any time before the transaction is completed,
they would be required to inform the Government of the same and voluntarily
withdraw from the assignment.
(h)
The interested parties would also be required to give an undertaking that there
exists no conflict of interest as on the date of their appointment as Advisors
in handling of the transaction and that, in future, if such a conflict of
interest arises, the Advisor would immediately intimate the Government of the
same. For disinvestment proposes,
‘conflict of interest’ is defined to include engaging in any activity or
business by the Advisor in association with any third Party, during the
engagement, which would or may be reasonably expected to, directly or
indirectly, materially adversely affect the interest of Government of India or
the Company (being disinvested) in relation to the transaction, and in respect
of which the Advisor has or may obtain any proprietary or confidential
information during the engagement, that, if known to any other client of the
Advisor, could be used in any manner by such client to the material disadvantage
of Government of India or the Company (being disinvested) in the transaction.
The conflict of interest would be deemed to have arisen if any Advisor
firm/concern, has any professional or commercial relationship with any bidding
firm / concern for the same disinvestment transaction during the pendency of
such transaction. In this context,
both Advisor firm and bidding firm would mean the distinct and separate legal
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entities
and would not include their sister concern, group concern or affiliates etc.
The professional or commercial relationship is defined to include acting
on behalf of the bidder or undertaking any assignment for the bidder of any
nature, whether or not directly related to disinvestment transaction.
(i)
On receiving information on conflict of interest, the Government would
give the option to the Advisor to either eliminate the conflict of interest
within a stipulated time or withdraw from the transaction and the Advisor would
be required to act accordingly, failing which Government would have the liberty
to terminate the appointment/contract.
Sd/-
(A.K.
Tewari)
Under
Secretary to the Government of India