``It will be closely watched and will set the tone for other sales.''The Government intends to transfer management control in the polymer-maker to the highest among four bidders.

US firm Dow Chemical Corp, Japan's Mitsibishi Chemical Corp, Reliance Industries, and a combine of Indian Oil Corp and the Chatterjee Group were all in the race, but company sources say Dow Chemical has since dropped out.IPCL is among a number of state-run firms listed for sale to strategic investors. The Government is trying hard to conclude five sales - Engineers India Ltd, Hindustan Teleprinters Ltd (HTL), aluminium-maker BALCO, Kudremukh Iron Ore and Company Ltd, besides IPCL - in fiscal 1999-2000 (April-March).

Of the five, the IPCL sell-off is critical to meet the Government target of Rs 100 billion ($2.30 billion).

``IPCL will perhaps be the only sale to be concluded this year,'' says an analyst who does not want to be identified.

Chairman and managing director of the ethylene-maker KG Ramanathan was confident. ``We think we will have a deal by February,'' he said.The remaining three bidders have completed due diligence reviews of IPCL, but certain hurdles remain.

The bidders and the government have been playing tug-of-war over the number of seats each holds on the board of directors.

``The bidders wanted a majority position on the board, which the government was opposed to. It now is agreeable to having four nominees of the strategic partner and three of its own. Also, it is agreeable to a non-executive chairman,'' says a government official close to the deal.

Valuations of the share sale price vary widely depending on which side one speaks to. Merchant bank Warburg Dillon Reed has been tasked with cutting the deal.

A senior official with one of the bidders, closely involved in the bidding process, says, ``We are not looking at anything more than the current share price.''

The IPCL share has been trading close to its 52-week-high of around Rs 139 in recent weeks. Volumes have been steadily increasing since early November and the scrip sold a record 6.25 million on December 6, according to the Reuters 3000 database.

The scrip has been on a clear uptrend. Its 200-day simple moving average moved up to Rs 113.49 as of December 6, nearly double the average a year ago.The buyer, in essence, will be paying a relatively high price. The share closed December 8 at 125.65.

But the senior official says the government wants an even higher price, after opposition parties accused it of selling stakes in Gas Authority of India Ltd to foreigners at a discount in November.

The desperation of a government trying hard to bridge a yawning fiscal deficit will complicate these expectations.

Prateek Agarwal, research analyst at investment bank SBI Capital Markets, says, ``IPCL is a commodity stock. The valuation will be close to the book value of around Rs 140 ...maybe a little more.''

IPCL's capacities are attractive. Its three plants at Baroda in western state of Gujarat, Nagothane and Bhander in Maharashtra together can produce 840,000 tonnes of ethylene.

``In the next three years the capacities will go up to about 1.5 million tonnes. That should be attractive,'' Ramanathan says.

The cost of a greenfield plant of that capacity is very high, he says. ``The Haldia plant (in West Bengal) has a capacity at 400,000 tonne and costs Rs 57 billion.''

Bidders may be underplaying the value of management control, says Memani. ``It used to be a blue-chip, not any more. This could be different if management control changes hands.''

Commodity stocks were highly valued till a few years ago, but have since been overtaken by high-growth software and pharmaceuticals stocks.The government holds around 59 per cent of IPCL's Rs 2.49 billion equity, which will come down to 34 per cent after the strategic sale.

It could drop to 26 per cent if holders of a convertible bond issued in 1997 prefer to convert the debt into equity rather than redeem it.