Centre raps four banks over business ethics

SBI Caps, Kotak Mahindra, Deutsche Bank and HSBC were hired as the book running lead managers (BRLMs) for SAIL’s Follow-On Public Offer (FPO) in September, 2010, much before Tata Steel reached an agreement with the four banks to manage its over over Rs 3,000 crore FPO, scheduled to open from January 19.

Terming the action of banks as “unethical”, Steel Minister Virbhadra Singh indicated that the development may cause some delay for SAIL in hitting the capital market “if it entails changing the merchant bankers.” “We are unhappy about it. I don’t know if they (banks) can do like this. Certainly, this is unethical..,”Singh told reporters at the global steel summit here. Meanwhile, a senior government official confirmed that notices have been sent to the banks, adding that, “It is purely conflict of interests. They have been asked to reply in the next 2-3 days and then we will take a decision in this regard (whether to change the merchant bankers for SAIL FPO).”

State-run Steel Authority of India had plans to raise Rs 8,000 crore in the current fiscal by selling a 5 per cent stake. The government will also sell an equal share in the first phase of the follow-on share sale, which was likely in February.

“We engaged them (the merchant bankers) first... Why Tatas chose to come on the same time with same merchant bankers is for them to explain, it is for the banks to explain,” Singh said, adding that SAIL Chairman C S Verma, the steel ministry and department of disinvestment are looking into the issue.

However, Tata Steel disagreed with the view of the steel minister. “That’s what he (steel minister) said... as far as my view is concerned, it is up to the bankers to decide,” Tata Steel Director Jamshed J Irani told PTI. In September, 2010, SAIL had appointed six bankers — SBI Caps, Kotak Mahindra, Deutsche Bank, HSBC, JPMorgan and Enam Securities — to manage its proposed Rs 8,000 crore FPO, which was likely to hit the capital markets in mid-February.

When asked how the same merchant bankers are managing the issue of two largest domestic steel companies, SAIL Chairman C S Verma, however, refused to join the issue.