Financial institutions led by Life Insurance Corporation of India (LIC) and State Bank of India (SBI) bailed out VSNL's local GDR book-building offer. The issue is likely to be priced in the range of Rs 765-800 per share. The figure may be lower considering the fact that scrip closed at Rs 675 at the Bombay Stock Exchange (BSE) on Wednesday.

There was some cheer for the issue in the international market with sources close to the syndicate indicating a marginal oversubscription. However, the price at which the bids are coming in is in the range of $ 8.50 to $ 9.50, which could lead to a pricing of about $ 9.30 per GDR. The GDR (previous issue) price for VSNL on Wednesday afternoon was $ 9.60 at the London Stock Exchange.

Sources said thatthe pricing would be arrived at after the close of the US markets and it may be announced on Thursday. The VSNL top brass was in constant touch with their Mumbai office on Wednesday, but no one was available for comment. In the international market the GDR pricing is expected to be priced in a band of $ 8.5 to $ 9. "The response was not all that encouraging except in the United States," a source dealing with the issue said.

The international offering is being lead managed by Credit Suisse First Boston and Solomon Brothers while the domestic offering is being managed by Kotak Mahindra and SBI Capital Markets.

Merchant banking sources said that LIC and SBI put in bids for seven lakh shares in the band between Rs 765 to Rs 800. Sources also said that State Bank of India subsidiaries including the State Bank of Saurashtra and the four subsidiaries of General Insurance Corporation of India have put in bids for one lakh shares. VSNL had offered one million shares in the domestic market and 10 million shares inthe overseas market.

This is the third disinvestment process in which domestic financial have put in a substantial amount. FIs had earlier bailed out the Concor and the Gail issues. Merchant bankers indicated that the domestic price might be priced at Rs 765 per share but declined to confirm the price. The pricing will be tonight in conformation with the government. Till then we cannot indicate what the exact price will be," a merchant banking source said.

Meanwhile, bears tightened their grip on the VSNL counter even as the lead managers made hectic attempts to place the stock at a premium to the local price on Wednesday afternoon.

On the domestic front, the stock registered a price erosion of 4.93 per cent to close at the day's lowest bid of Rs 675 with a volume of 20,508 shares. On the National Stock Exchange the stock closed slightly higher at Rs 681.90 registering a decline of 3.5 per cent.

However the VSNL GDR (two GDRs = one equity) was traded at $ 9.60 witnessing a marginal decline of 0.78 percent over Tuesday's close. The sharp fall in the underlying stock price led to a sharp rise in the premium at which the GDR has been trading on the London Stock Exchange. The premium has now expanded to 20.75 per cent from 15.12 per cent registered on February 9.

It may be recalled that since the first day of the road show (January 27) the market value of the GDR has been steadily declining. The GDR has seen a fall from $ 10.63 levels to trade at $ 9.60 on Wednesday. According to market sources, domestic institutions played a strategic role in first propping up the index based stocks and enabling a few institutions book profits in order to enable them channelise these gains in order to buy the VSNL stock offered by the government. Market was agog with rumours that LIC booked huge profits at the counter of HLL which would enable them to participate in the divestment programme.