Government sees conflict of interest in Tata Steel, SAIL FPOs
15 Jan 2011
The government has reportedly pulled up four investment banks for taking up the management of Tata Steel's follow-on public offer (FPO) at a time when they were already mandated to do the same work for Steel Authority of India Ltd (SAIL). This is being interpreted by the government and the public sector undertaking as a conflict of interest.
The four banks that are handling both the issues are SBI Caps, HSBC Bank, Deutsche Bank and Kotak Mahindra Bank.
According to Business Standard, SAIL has already sent show-cause notices to these banks, asking them to explain their position. ''The letter has been sent after consultations with the steel and disinvestment ministries. It has been a collective decision, as the government feels strongly about the conflict of interests here,'' the paper quoted an unnamed senior government official as saying.
SAIL chairman C S Verma refused to comment. But sources in SAIL said their concern stemmed from the fact that the SAIL issue would come after Tata Steel's and the ''common bankers should see that the issue does not suffer''.
When asked, none of the four banks involved wanted to comment on the subject.
Bankers, however, are surprised. ''The time difference between the two issues is been quite huge. There was no exclusivity clause in the contract. So, you really don't expect us to sit tight for all this while. The fee pool is shrinking, as competition is only going up,'' said a banker.
