Bonus issue may ensure better price for SAIL FPO: Udayan

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SAIL is likely to issue bonus shares before its follow-on public offer, sources told CNBC-TV18. The government has suggested a bonus issue but the company's management is yet to finalise its issue plans.

Commenting on this development, Udayan Mukherjee, Managing Editor, CNBC-TV18, says after NTPC 's issue the government is trying to sweeten the carrot a little bit by offering a bonus and quickly pushing through its FPO. "Maybe there will be a short-term price movement and the government can get its job done at slightly higher than the market price."

Here is a verbatim transcript of Udayan Mukherjee's comments on CNBC-TV18. Also see the accompanying video.

Having got slapped a bit on the wrist on NTPC, they want to fatten it or sweeten it for the SAIL FPO, less they get it wrong once again. So out comes a bonus or will come a bonus on SAIL and therefore maybe there will be a short-term price movement and the government can get its job done at slightly higher than the market price.

I think it's important for a lot of people to understand that going forward SAIL is just going to depend on what is going to happen with the commodity complex globally. The answer to that is a bit unclear, it may still pan out well, but all these noises on China tightening etc, the recent turbulence in the commodity market, the fact that most of these stocks have outperformed in a major way; all present some kind of risks. So I think people need to be cognizant that that is what leads the SAIL stock rather than a bonus in the near-term where the affect is like the budget, which lasts for a day or two.

So I don't know whether the government is doing the right thing by trying to sweeten the carrot a little bit by offering a bonus and quickly pushing through its FPO. I have my apprehensions and my own misgivings about the whole FPO route, but I think they are trying to do that after the NTPC issue, maybe successful, maybe not. But I guess they will push off couple of these through-SAIL, REC etc, so that the fiscal deficit picture looks a little bit more respectable than it is, next year.