As per various media reports (Reuters, Bloomberg), the Govt has approved a 20% stake sale in SAIL with the sale likely to take place in 2 tranches. In the first tranch, the Govt would sell 5% of its holding and the company would issue 5% fresh equity. The 2nd tranch sell would also have a similar structure with both parties selling 5% each. SAIL would issue fresh equity totaling 10% on its current equity base 4130mn shares. Currently the Govt stake stands at 85.8% which post both the tranches would come down to 69%.
As details on the issue came out, the stock has declined sharply by 6%.
Post the two tranches, based on current stock price of Rs238, the free float would increase to $7.5bn or 1.4bn shares. We believe in the near term there would likely be an equity issuance over-hang on the stock given the large size of the issue.
Does SAIL need the cash given a cash rich balance sheet? Yes in our view. March-10 quarter to be strong, but June to be better as full impact of
steel prices flows through
