In what could be a major boost to the ensuing public offer for sale of 10 per cent equity in the state-owned Oil and Natural Gas Corporation, the Securities and Exchange Board of India has permitted lead managers and book runners to issue participatory notes for attracting foreign investment.

Sebi's permission to the merchant bankers comes along with some conditions, including disclosure norms, sources associated with the divestment process said in New Delhi.

In view of the importance being attached to the success of ONGC issue for attainment of the revised divestment target of Rs 14,500 crore (Rs 145 billion) for the year 2003-04, the government had recommended to Sebi for favourable consideration, sources said.

So far, Sebi had permitted fund managers to use participatory notes, but barred the lead managers and book runners from using the instrument by which foreign funds not registered in India could participate in a public offer.

Meanwhile, divestment secretary Dhirendra Singh and finance secretary D C Gupta will join the ongoing roadshows for ONGC public offer and hold meetings with investors in London, New York and Boston, beginning March 8 in a bid to hardsell the issue.

The issue for 14 crore (140 million) shares would hit the market on March 5 for which the government would fix the price band on Wednesday.

The government is understood to be targeting about Rs 10,000 crore (Rs 100 billion) from the sale of 10 per cent equity in ONGC.

The divestment ministry officials clarified that only one per cent of the ONGC stock was being traded presently and therefore, it would not be proper to link the floor price for the issue, to be announced tomorrow, to the market price.

"We would look into everything to arrive at a fair price after taking into account the strength of the company and advise from experts," they said.

ONGC is among the six PSUs where government is divesting its stake, including IBP, GAIL, IPCL, and CMC through the public offer route during this fiscal.

IPCL and CMC issues, which closed recently, shored up the government finances by close to Rs 1,400 crore (Rs 14 billion), while GAIL and IBP have also recorded oversubscriptions.

Divestment Minister Arun Shourie is reported to have met Sebi chief G N Bajpai yesterday in Mumbai, apparently to clear some issues relating to the ONGC offer.

DSP Merill Lynch, J M Morgan Stanley and Uday Kotak have been mandated as lead managers for the ONGC issue where government holds 84 per cent stake. Besides, 15 per cent equity is now with two other oil PSUs -- IOC and GAIL.

The plea for the notes came from book runners who requested government to help get permission from Sebi to attract more foreign investment.