By Sunita Nagpal, CNBC-TV18

It is too early to say that the BSNL IPO (Initial Public Offering) is on track. But it looks like they are more confident this time than they were in all the previous attempts that have been made because the unions have been against this IPO from the very beginning. They have always threatened whenever there was talk of an IPO to go on an indefinite strike.

The Telecom Minister A Raja has given a sweetener to the employees that he will be offering shares at par to them, and they can pocket whatever gains they get whenever the stock is listed.

The CFO of BSNL has said that he expects the issue to go through in the current fiscal, which looks very difficult because the opposition of the Union is very strong. The Minister has said that no decision will be taken unless both the Union as well as the management takes some kind of a decision. So, unless they come on the same page there will be no decision taken on the IPO.

But it looks like some headway has been made between the two because the CFO sounded very confident that this would go through in the current fiscal year. He said they are looking at raising USD 10 billion. The company is valued at USD 100 billion and they were looking at divesting a 10% stake.

At the same time, he also said that equity capital is about Rs 5,000 crore and they are looking at divesting 10% stake. So, if we work that out based on a Rs 10 face value, the numbers don’t quite add up because based on that if we take the Rs 300-400 band that the minister talked about, the money raised works out to be about Rs 17,000-20,000 crore, while the valuation they are talking about is Rs 40,000 crore. So, somewhere there is some disconnect. Either they are not going ahead with 10% or it is much lower.

Another factor is that in the current state of the markets, it would be very difficult for such a huge IPO to go through in this market. So, these are the factors that one needs to look at. The first hurdle that needs to be climbed is the Union, which is very strong, and still has a lot of Leftist impact, which is no longer a part of the government, but has a strong hold on the union. That could be one hurdle going ahead that could have an impact on the IPO.