MMTC's offer-for-sale today received bids for 12.4 crore shares against the offer for 9.33 crore shares. The issue was subscribed by 1.33 times.

The indicative price or the weighted average price, according to the BSE Web site, is Rs 60.01. At this indicative price, the stake sale could fetch the Government over Rs 568 crore.

The company stock ended the session at Rs 190.35 on the BSE, down 9.98 from its previous close.

Lower circuit level

Soon after the commencement of the stake sale, the stock plunged to a low of Rs 190.35, down 9.98 per cent or Rs 21.10 apiece over the previous close on the BSE within minutes of commencing of trade. This is the maximum the stock can fall due to circuit filter.

The Empowered Group of Ministers (EGoM) on disinvestment, headed by Finance Minister P. Chidambaram, had on Wednesday cleared the stake sale through the offer-for-sale (OFS) route.

In fiscal 2012-13, MMTC reported a loss of Rs 70.62 crore due to 57 per cent decline in total revenues compared to the previous fiscal. The company had reported a profit of Rs 70.72 crore in 2011-12.

Public shareholding norms

The sell-off will bring down the Government’s equity in the company to 90 per cent. This will help the company to meet the minimum public shareholding norms, as the Securities and Exchange Board of India norms prescribe a minimum 10 per cent public shareholding. The regulator has set a deadline of August for the listed public sector enterprises to meet the norms.

Offer-for-sale route

OFS is a new mechanism for selling shares and is used by listed companies only. Under this method, the floor price or base price is set by the issuer, after which various investors bid. The highest bidder gets the maximum number of shares.

This mechanism is different from the traditional follow-on-offer method. Also, it takes little time to complete and does not entail too many formalities, such as roadshows or filling up forms.

Although it is said that all categories of investors — institutional, high networth individuals, retail and employees — can participate in the offer, there will neither be any quota nor any discount for any category of investors.

The Government aims to mop up Rs 54,000 crore through disinvestment this year. This includes Rs 40,000 crore through offloading stakes in various Central Public Sector Enterprises. If successful, MMTC would be the first public sector company to be divested.

(This article was published on June 13, 2013)
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