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GOVERNMENT
OF INDIA
MINISTRY
OF DISINVESTMENT
ENGAGEMENT
OF COORDINATOR CUM ADVISOR (CA) FOR
DISINVESTMENT
IN INDIAN PETRO CHEMICALS CORPORATION LIMITED (IPCL) THROUGH DOMESTIC OFFERING
1. Introduction
1.1
Indian Petrochemicals Corporation Ltd. (IPCL) is a leading integrated
manufacturer of polymer, fibre and fibre intermediates and other chemical
products from hydrocarbon feedstocks. The
paid-up capital of the company is Rs. 500 crores and equity capital is Rs.
249.05 crores as on 31.3.2002. In
May, 2002, Reliance Industries acquired GOI’s
26% stake in IPCL for Rs. 1491 crores. At
present, Government of India holds 34% of the equity of the company. The
shares of the company are listed on the various stock exchanges in the
country. The total turnover and net profit of the company during
the year 2002-03 are Rs. 5526.68 crore and Rs.107.47 crore
respectively.
2.
Government decision
2.1
Government of India (GOI) intends to disinvest its remaining stake of
34% of the equity shares of IPCL through domestic offer through the Book
Building process. Expressions of Interest
are invited, by 17.00 Hrs. (IST) on 31.10.2003, from reputed
merchant/investment bankers either singly or as a consortium, with specific
expertise in disinvestment through capital market offerings to act as
Coordinator-cum-Advisor and to assist and advise the Government in this
process.
3.
Responsibilities of the Coordinator-cum-Advisor (CA)
3.1
The Coordinator-cum-Advisor (CA) would be required, inter alia, to
advise on the timings and the modalities of the capital market offer in order
to ensure best returns to the Government. They would be required to advise on
all aspects of the offering including assisting 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, coordinate with printers for timely completion and distribution of
offering documents and other relevant material needed for sale. Their
responsibilities would include pre-market survey, road shows, book building
and generation of interest amongst prospective investors. The CA will also be
required to do the market research along with pricing and allocation of shares
and after sale support. They would also guide and facilitate in obtaining
necessary approvals, completion of regulatory requirements including Listing
etc. and perform all other responsibilities connected with such offerings.
The responsibilities of CA would also include appropriate underwriting
connected with the offering.
3.2
Since it is desirable for Government to have two
Coordinator-cum-Advisors, having adequate experience in similar offerings, Government would
select two parties who together form a team and will be
called Joint Coordinator-cum-Advisors (JCA). The JCAs selected will also have
to form a syndicate including co-managers in consultation with Government.
(i) Full
particulars of the constitution, ownership and main business activities of the
prospective Coordinator-cum Advisor (bidder). In case of consortium bids, the
particulars of the coordinating firm having the principal responsibility for
the mandate as well as those of other parties.
(ii)
Unabridged Annual Reports or audited financial accounts for
the last three years of all the parties.
(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.
(v) Understanding
of the Company
Details
of understanding and SWOT analysis of IPCL may be furnished.
(vi) Experience
and presence in India
A
brief note evidencing the prospective CA’s 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.
(vii)
Broad Scheme for the issue
a)
Suggestion of Optimal syndicate structure for maximizing quality and
quantity of demand.
b)
Proposal on syndicate incentivization.
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
(viii)
Manpower
commitment
Details
of the team that will be handling the proposed issue, their status in the
organization, their background, qualification, experience and present
addresses.
(ix) 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.
(x) 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.
(xi)
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.
(xii) After-market
support
Strength in lending after market support, with specific reference to
Indian issues managed in the past.
(xiii) 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.
(xiv) 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-II). The interested parties are requested to
carefully go through the guidelines and after satisfying that they are
qualified to act as Joint Coordinator-cum-Advisor, 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 Ministry 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 Advisors/
Coordinators.
b)
Sector expertise and experience.
c)
Understanding of the IPCL.
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 Chairman of the Inter-Ministerial-Group. The fee quoted should be
unconditional and gross of all taxes.
7.
Fee
7.1
The Coordinator-cum-Advisor will need to quote a fee for the domestic
issue as a percentage of disinvestment proceeds through domestic offering in a
sealed envelope. The fee quoted should be unconditional and gross of all
taxes. A drop-dead fee,
payable in case Government abandons at any stage after the process has been
started by the Government/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, as well as to printers appointed by
GOI, should not be included in the financial bid. Expenses on Road Shows,
conferences and travel, boarding and lodging, only of Government/IPCL
officials will be borne by the Government/IPCL.
The CA 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, prospectus, etc. The
CA will be liable to pay taxes for their professional services as per laws of
the land.
8.
Procedure for Selection of the Coordinator-cum-Advisor (CA)
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
the 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
requested to match the fees quoted by L1.
In case L2 does not accept the offer, Government will make the offer to
the L3 and the process will continue till Government appoints two CAs.
8.3
The two CAs selected by Government would work as a team and both the
selected CAs would be called Joint Coordinator-cum-Advisors (JCA). The two
Joint Coordinator-cum-Advisors (JCAs) would share the aforesaid fees equally.
9.
Clarifications
9.1
If any further clarification is needed about the assignment, the
under-mentioned officer may be contacted.
Shri
Surya Maiti,
Under
Secretary
Ministry
of Disinvestment
II
Floor, Block No.11
CGO
Complex
Lodhi
Road
New
Delhi - 110 003
Tel.
011-2436 8523
Fax
011-2436 6524
e-mail
: smaiti@hub.nic.in
Annexure-I
Details of Domestic Issues
(Value Rs. in Crore)
Parameters
|
1999 No. of Mandates and Value |
2000 No. of Mandates and Value |
2001 No. of Mandates and Value |
2002 No. of Mandates and Value |
2003 No. of Mandates and value |
Total |
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BOOK BUILDING ISSUES (a)
Equity (b)
Debt Issues |
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Issues
pulled out/withdrawn pre or post road shows |
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Details of pending transactions in
Petroleum Sector |
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Annexure-II
No.
6/4/2001-DD-II
Government
of India
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 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 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