The sale of the government's five per cent stake in Oil and Natural Gas Corporation Ltd
(ONGC) on Thursday turned out to be utterly chaotic with buyers falling short and public sector banks and Life Insurance Corporation of India (LIC) moving in at the last minute to save the day for government.
The auction started with a lukewarm response
at 9.15 am causing concern among government's spin doctors and merchant bankers. The issue appeared to be in throes of a crisis as hectic parleys ensued for more than four hours after the end of the auction process at 3.30 pm and the final count of the bids remained a mystery even five hours after the close.
It was only around 9 pm that Finance Ministry officials confirmed that the all the shares on offer had been sold and the government had raised the targeted Rs 12,000 crore from the market. After putting the final bid count at the end of the auction at 22.9 crore shares for the total offer size of 42.77 crore shares, the stock exchanges later said that the issue had got fully subscribed in the auction, where the floor price was fixed at Rs 290 per share.
ONGC did not reveal any information. Repeated calls made to the investors relation department remained unanswered. Additional secretary in Department of Disinvestment Siddharth Pradhan told reporters that the issue has got fully subscribed and market regulator Securities and Exchange Board of India (Sebi) has been asked to look into the "technical glitches" due to which some bids could not get registered.However, BSE and NSE offcials said there were no glitches and their systems functioned normally.
However, till 9 pm, the stock exchange data continued to show that the issue had failed to receive the requisite number of bids. Towards the fag end of the auction, bids worth only Rs 8,500 crore had been received after which public sector banks and LIC jumped into action with the required bids to enable the issue to scrape through.
LIC is believed to have bought shares worth over Rs 4,000 crore, according to market analysts. Even the State Bank of India (SBI) is learnt to have chipped in to enable the issue to sail through as foreign institutions stayed away from bidding. For the first time, a listed company's shares were put for auction in the market as per Sebi's new guidelines.
Some analysts blamed the government and even the exchanges for their lack of preparedness for the first-ever auction procedure at Indian stock exchanges
. "There is some goofup. If LIC and SBI have been made to subscribe to the issue, then it is only book entry. The government has actually not got any money. It is a failure as FIIs hardly participated in the exercise," said Kishor Ostwal, CMD, CNI Research.
"The first issue under the newly announced SEBI guideline was casually handled and lost. No one knows what is happening. There is absolute chaos. There was no efficient auction mechanism in place. The merchant bankers ill-advised the government," said SP Tulsian, an independent stock analyst.
A large number of Foreign Institutional Investors and mutual funds did not participate in the bidding because of the high floor price. Fund managers said that ONGC is not rated too high because of its subsidy burden. The government's inability to make the retail investor participate in the bidding has also come under criticism as there was no quota available for retail investors neither no rebate was offered.
ONGC shares plunged in the stock exchanges. The stock closed with a loss of 1.87 per cent at Rs 287.85 on the BSE while it plunged by 1.77 per cent to close at Rs 288 on the NSE.
Courtesy: Mail Today