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Tuesday, Jun 01, 2004

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PSU public offers trading at a discount

Virendra Verma

Mumbai , May 31

THE much-hyped disinvestment of six PSUs in the first quarter of this year through public offers may have filled government coffers, but it has burnt a hole in the portfolios of investors who subscribed to these issues, with all of them now trading below the offer price.

Based on Monday's closing price on the BSE, ONGC, which floated the biggest public offer in the history of the Indian primary market, closed at Rs 625.45 — a discount of 16.60 per cent to the offer price. Similarly, Gail is trading at a discount of 19.38 per cent at Rs 157.20, IPCL is down by 17.41 per cent at Rs 140.40. The CMC stock is trading at a discount of 7.5 per cent at Rs 448.45 to the offer price.

The biggest loser is IBP, which is down by 28.87 per cent at Rs 441 compared with the issue price. Dredging Corporation is the only stock, which is trading at a marginal discount of 1.5 per cent at Rs 394 compared with the offer price.

The six PSUs in which the Government diluted its stake are ONGC (offer price Rs 750), Gail (Rs 195), IPCL (Rs 170), IBP (Rs 620), CMC (Rs 485) and Dredging Corporation (Rs 400).

What's more interesting is that the shares prices of all these PSUs, except Dredging Corporation, are trading even below the offer price to retail investors. In order to distribute wealth among the Indian public (read retail investors), the NDA Government offered shares at a discount of 5 per cent.

At the time of the public offers, the issues received good response from the investor, with all of them being oversubscribed. However, after the new Government came to power, selling pressure in these PSU shares has started. "Selling in these PSUs is not because of the Government saying no to privatisation or disinvestment, but due to the overall sentiment of the market," said a broker.

However, a dealer with a foreign broking firm said, "Selling in PSUs such as ONGC, Gail and others is mainly from FIIs, which are reducing their exposure in emerging markets, including India." He said at the time of the public offer, the major interest in these issues was from FIIs, and because of their selling now, the stocks are being battered.

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