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ONGC Offer Gets Bid For Only 68%

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[The auction for sale of government's 5 per cent stake in ONGC on Thursday got bids for 29.22 crore shares worth about Rs 8,500 crore, but could fetch only about two-third of the targetted proceeds of over Rs 12,000 crore. At the end of the one-day auction, the auction got total bids for 29.22 crore shares, including 19.92 crore on the NSE and about 9.3 crore on the BSE platform, exchange official said. The final figures were yet to be updated on the websites of the two bourses. The total bids were worth about Rs 8,500 crore and accounted for 68.3 per cent of the total offer size. Analysts said that a poor response to the bidding could be attributed to the fact that ONGC shares were trading very close to the offer price in the secondary market and even slipped below the floor price by afternoon trade. "I think greed played out here. This should be one of the lessons - not to try and price the offering at a premium, especially when a reference point is available in the market price," said Ambareesh Baliga, chief operating officer at Mumbai's Way2Wealth Securities. Market commentators were quick to slam the government's handling of the long-delayed ONGC sale, which was conducted via auction on the stock exchanges in a test case for a newly approved method. "The ONGC issue should have been priced at a discount and planned out well, which would have created a positive sentiment for future disinvestments," said Sunil Jain, vice president of equity research at Nirmal Bang. There was chaos with TV channels saying it had generated bids for just two-thirds of the shares on offer, but both of the country's main stock exchanges saying they were still counting orders. "I'm in a crisis meeting. I can't talk," Sidhartha Pradhan, additional secretary in the government's Department of Disinvestment, told reporters outside his office in New Delhi before shutting the door. One channel, NDTV Profit, said state-owned Life Insurance Corp of India (LIC) had stepped in to buy up the remainder of the shares, but another channel said this was not the case. The National Stock Exchange and the Bombay Stock Exchange said they were still counting bids that had been entered. The government had proposed to sell about 42.77 crore shares through the auction at a floor price of Rs 290 a piece. The government on Tuesday decided to offload five per cent stake in ONGC through the auction route and the planned sale could fetch the government about Rs 12,000-13,000 crore. In the event of the total number of orders received at or above the floor price being less than the number of shares being offered for sale, the government would have the right to either conclude the sale to the extent of subscription or cancel the sale. The shares would be allocated on 'price-priority' basis, meaning the bidders at highest price would be allotted shares. The bids were mostly in the price range of Rs 290-293 per share for the auction, which commenced at 0915 hours and closed at 1530 hours today. The government had fixed a floor price of Rs 290 per share for the share sale through this one-day auction, wherein it was targetting to raise about Rs 12,000-13,000 crore. The bidding began on a weak note and only about 37,500 shares were bid for in the first hour. Till 1500 hours also, total bids had come in for only about 1.43 crore shares, but the momentum picked up in the last 30 minutes. After an initial spike of about one per cent, ONGC shares had also turned weak and even slipped below Rs 290 level by afternoon trade. The stock finally closed 1.87 per cent down at Rs 287.85 at the BSE. The government owns 74.14 per cent stake in ONGC and has proposed to sell 427.77 million shares or 5 per cent equity. The BSE (Bombay Stock Exchange) was the designated exchange for the proposed share sale, but orders were placed on both the BSE and NSE (National Stock Exchange). The sale of shares took place at a separate window of the two bourses. Any modification or cancellation of the orders would not be allowed in the last 30 minutes. No single buyer, other than mutual funds and insurance companies, would be allocated more than 25 per cent of the size of the offer. Still Counting.... More than two-and-a-half hours after the auction closed, official data was not available on how many shares had been bid for, but TV channels reported bids had been received for about 290 million of the 427.77 million shares on offer. A company official said he could not immediately comment, while LIC officials were not available for comment. Shares in ONGC, the country's largest oil and gas producer and second-most valuable listed firm, ended the day down 1.7 per cent at 288.2 rupees. The government had earlier planned to sell ONGC shares through a public offer, but that was scrapped last October after a tepid response from investors amid weak equity markets. If fully subscribed, the offer would rank among India's five biggest equity offerings. Citigroup, Bank of America Merrill Lynch, HSBC, Morgan Stanley, Nomura and India's JM Financial were the banks on the ONGC deal. (BW Online Bureau With Agencies)