After the bad experience with the French auction method in follow-on public offers (FPOs),

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the government plans to adopt the book-building route in the upcoming Engineers India (EIL) and Hindustan Copper (HCL) issues. Although a final decision has not been taken for PowerGrid and Steel Authority of India (SAIL) FPOs, the government may revert to the French auction method if the loophole in the present method is plugged.

“The government is considering the issue and till the time it comes up with a concrete proposal, we would continue with the conventional book-building method for FPOs,” a person familiar with the matter told Financial Chronicle.

Government sources said at least four FPOs are planned over the next six months. Engineers India will be the first one to come out with an FOI in June, the road shows for which have started on May 22. EIL will be followed by Hindustan Copper (HCL) in August, PowerGrid (PGCIL) in September and SAIL in October.

The French auction method of book building was tried in the recent public sector FPOs of NTPC and REC. Some of the big institutional investors, who had taken part in these two issues, later expressed concerns about lack of price secrecy in the method.

The Sebi in November 2009 started the French auction method in which institutional investors have the freedom to place bids at any price above the floor price and they get allotment on the price-priority basis. This means investors who place bids at higher price get the preference.

Non-institutional investors such as retail and high net worth individuals (HNIs) bid at the floor price in this method.