The Hindu Business Line : We're now more confident of tapping capital markets: Shourie

THE overwhelming investor response to the six public offers would enable the Government approach the capital markets with much better confidence in future, the Disinvestment Minister, Mr Arun Shourie, said.

"One of the many things we have learnt from the six public offers is that we now have a much better confidence in approaching the capital markets for sale of Government shares," the Minister told newspersons here on Monday.

The decision to offload Government stakes in six firms was taken just three months ago and the issues were marketed in just five weeks. "If we had got more time for systematic marketing, we would have got even better response from the investors," he pointed out.

Despite criticism from analysts and fund managers, the public issues received tremendous response from the investors as is manifest in the oversubscription to each of these issues. "Every single issue was oversubscribed ranging from 2.8 times to 18.1 times. Even the large issues of IPCL, Gail (India) Ltd and ONGC were oversubscribed by 4.8 times, 9.1 times and 5.88 times, respectively," he said.

Another important feature was the improvement in the price-earnings ratio (P/E ratio). From 1991 to 1998-99 when the Government resorted to minority stake sale in PSUs, the P/E ratio used to range from four to six times. "In this case, the P/E ratio was 30.3 times for IPCL, 17.05 times for CMC Ltd, 9.75 times for Gail (India) , 9.7 times for ONGC and 8.5 times for IBP Co," Mr Shourie revealed. The better P/E ratio has been attributed to the strength of the companies and the skill accumulated by the Government in the last four years.

Despite divulging these statistics to show the success of the public offers, he refused to be drawn into a debate on whether the Government would prefer the public offer route over strategic sales for disinvestment in state-owned entities.

"Why do we always have to think of either/or. Why can't we think of and/also," he said. "For companies such as IOC, ONGC, and Gail where the Government does not want to cede management control to private buyers, naturally public offer is the way," he remarked. But, in other cases, strategic sales would be preferable. Still, we will have to see what the Prime Minister decides after the elections," he quipped.

Mr Shourie also disclosed that a total of 17 lakh retail applications had come for all the six public offers in IPCL, CMC Ltd, IBP Co, Dredging Corp, Gail (India) and ONGC.

"This is a big contribution to widen the equity market. In the wake of the stock market scam, it was widely felt that retail investors would shun the stock markets. This has proved to be false," he said.

Referring to the response of highly qualified, large global funds whom he described as "very discriminating investors", Mr Shourie said that it showed "India counts for a lot in the investment community abroad".

"We should capitalise on these sentiments and this is the kind of confidence with which we should proceed," he added.