The Hindu Business Line : Sharp dip in disinvestment cos' stocks

SHARE prices of companies lined up for disinvestment have declined sharply from their yearly highs, contrary to the share movement in the earlier disinvestment process.

Brokers said the decline in share value this time around was on account of higher floating stock; besides these companies offered shares at a discount to the market price.

Six companies in which government is diluting its stake through public offer are — ONGC, GAIL, IPCL, IBP, CMC and Dredging Corporation. Barring Dredging Corporation, stock values of the other five have moved down between 20-34 per cent from their 52-week high levels. The decline in the stock price of these companies (except Dredging Corporation) is more than the fall in BSE's PSU Index and BSE Sensex. From 52-week high level, the BSE PSU Index declined from high of 4459.67 to today's closing of 3687, a fall of 17.32 per cent and the BSE Sensex moved down by 8.24 per cent.

The steepest fall is seen in the stock price of GAIL; down 33.80 per cent from its high of Rs 313 to today's closing price of Rs 207.20. ONGC stock lost 28.34 per cent to Rs 713 from its high of Rs 995.

IPCL fell by 21.26 per cent, CMC by 27.90, IBP was down by 24.41 per cent. Dredging Corporation fell by 12.18 per cent.

Brokers said the fall in these PSU stocks was mainly on expectation that the shares would be offered at a steep discount to the market price. In addition, brokers said the buying interest in these shares have gone down in the secondary market due to the availability of these shares of in the primary market.

FIIs have been interested in these PSU stocks, but after the government announcement most of them have put on hold their secondary market activity to buy in the primary market, said a dealer with a foreign broking firm.

He said small investors also want to subscribe to these shares at a marginal discount to the market price through the public offers.

However an analyst with a domestic broking firm said, "The shares of these PSUs had run up very fast especially in the month of December and January. After the sharp rise, the fall is inevitable."

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