Govt claims issue fully subscribed; ONGC top management virtually kept out

Uncertainty prevailed over the fate of state-owned energy giant Oil and Natural Gas Commission's offer for sale of 42.77 crore shares on Thursday at a floor price of Rs 290 a share.

Till late at night, there was no official confirmation of the actual response to the issue, either from the stock exchanges, ONGC or the Department of Disinvestment, which masterminded the sale.

News channel reports said that the offer for sale received bids for 29.22 crore shares worth about Rs 8,500 crore against the offer of 42.77 crore shares that should have fetched over Rs 12,000 crore for the Government.

However, some sources maintain that the issue was fully subscribed.

While government sources claimed that certain “last minute” orders had led to the issue being fully subscribed, data available on the Web sites of both the BSE and the NSE showed only a tepid response to the issue.

The BSE and NSE Web sites showed that bids were received only for 1.43 crore shares, or just over three per cent of the issue size, as of 3-20 p.m., ten minutes before the sale closed.

‘Goes to Public exchequer'

The Petroleum Minister, Mr S. Jaipal Reddy, when asked about the reversal in trend of the sale, which had a brisk opening, said that his Ministry has no comment to make on the issue as it was handled by the Department of Disinvestment.

“The money that accrues from the sale gets accredited to the public exchequer,” he said indicating that benefits would not come to the Petroleum Ministry, even if it was oversubscribed.

Asked if the reason for this performance of ONGC could be the subsidy issue, Mr Reddy said the matter was between the Ministries of Finance and Petroleum and that the investors in ONGC “are mature enough to understand the problem.”

According to sources in the Capital, ONGC's top management was virtually kept out of the loop on the decision to offload the stake, with neither the ONGC Chairman nor the Company Secretary reportedly present at the meeting that fixed the floor price.

Money transfer

According to sources, whose information was not officially confirmed, state-owned financial institutions led by LIC threw a lifeline to the issue at the last minute, which led to the exchanges not being able to release the final bid quantum.

“What happened between 3-20 p.m. and 3-30 p.m. that the exchanges are not able to give subscription figures even after two hours?” asked Mr Arun Kejriwal, Founder, KRIS Research. Stock market sources said that domestic institutions, LIC and State Bank of India subscribed heavily to the issue in the last 10 minutes while FIIs kept away from this offer for sale. 

Marketmen said this was a clear case of a failure on the part of the government, as asking domestic institutions to subscribe to the issue amounted to transferring its money from one pocket to another.

“FIIs were not comfortable with the floor price and they could wait until the domestic institutions sell the shares at a price cheaper than the floor price of Rs 290 a share,” said the Managing Director of a research firm. Interestingly, the ONGC scrip closed at Rs 287.85 to a share, below the floor price of Rs 290, on the BSE, shedding 1.87 per cent over its previous close of Rs 293.35.

(This article was published on March 1, 2012)
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