Mumbai: The 15,000 crore initial public offer (IPO) of Coal India Ltd received close to 1.7 million applications, but Link Intime India Pvt. Ltd, the registrar that processed these applications, allotted shares and arranged refunds, earned a princely 8,500 from the government.

Typically, registrars charge around 5-6 per form for public share offerings by private firms. At this rate, Link Intime should have charged 85-90 lakh. The price war among investment banks, which quote near-zero fees to win mandates as part of the government’s divestment programme, has now percolated down to other intermediaries, particularly registrars and share transfer agents.

In an attempt to gain market share by winning the disinvestment mandates of public sector units, or PSUs, these agents—responsible for processing applications, allotment of shares and refund of money on rejected applications—are cutting their fees drastically.

Karvy Computershare Ltd, a joint venture between Hyderabad-based Karvy Consultants Ltd and Australia-based Computershare Ltd, and Link Intime of Link Market Services Ltd of Australia and Intime Spectrum Registry Ltd are the leading registrars.

Bigshare Services Pvt. Ltd, Sharepro Services (India) Pvt. Ltd and Integrated Enterprises Pvt. Ltd are other registrars in the market.

The department of disinvestment (DoD), a division of the finance ministry that allocates mandates for government share sales, follows the so-called L-1 bidding system in which the entity that quotes the lowest fees for its services wins the mandate.

“It’s not a transparent process. It is not even on DoD’s website. There is a problem," said a registrar who is not allowed to bid for PSU mandates and spoke on condition of anonymity.

According to him, unlike merchant bankers, where there is an open tender technical bid and price bid, in the registrar space the request for proposal is directly sent to the top two registrars only.

“Even for small issues of 1,000 crore or 1,500 crore, only the top two registrars are allowed," the person said.

“...only these two (Karvy and Link) are eligible. Nobody knows what the eligibility criterion is. Nobody seems to be bothered. Is there any committee that has studied the capabilities of other registrars?" he said. According to him, these two registrars are undercutting each other as they want to have a larger share of the business. He declined to be named.

A senior DoD official said the government has set performance criteria for registrars and only those who have the credentials are allowed to bid.

“Once the bidders are shortlisted based on their track record, mandates are awarded on the basis of fee quoted. Companies are keen to handle large issues; that’s why they quote low. Competition is good," he said, adding, bids quoting “zero fee" are not entertained. The official didn’t want to be named.

The government seems to have reasons for keeping out smaller firms. In 2004, the registrar appointed to manage Oil and Natural Gas Corp. Ltd’s IPO could not handle the issue and refunds.

Link Intime, the registrar for the Coal India Ltd issue, quoted a price of half a paisa per form to win the mandate.

It also won the just-concluded MOIL Ltd issue and is registrar for the Punjab and Sind Bank IPO that opened on Monday.

“There will be competition. And such bids will happen. We can’t have a monopoly," said M.V. Ramnarayanan, director, Link Intime.

“We will be bidding for all the PSU issues. How much we bid for will depend on strategic calls made on issue-to issue basis," he added.

V.Ganesh, chief executive officer, Karvy Computershare Ltd, said the L-1 bidding system in which the mandate is given to the lowest bidder has resulted in such low bids.

Ganesh said such undercutting could affect the quality of service and the health of the industry in the long term.

Karvy is trying to offer value-added services to both investors and intermediaries such as merchant bankers to make its services more attractive.

A company statement on Friday said it had launched K-PRISM (Karvy–premium registrar investor service on mobile), a mobile interface that enables investors to access information on allotment of shares, refund status and keep track of upcoming offerings.

Experts say the low bids are a calculated bet.

Unlike investment bankers, registrars get appointed as share transfer agents whose job begins where the registrar’s ends.

“This is a perennial business. As long as shares are traded, transfer agents are needed. This means follow-on billing every month. This could be a consolation," said the registrar quoted earlier.