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If you thought that LIC was dragged into doing a rescue act of the ONGC offer-for-sale at the eleventh hour, think again. The insurance behemoth's sole custodian, Stock Holding Corporation of India Ltd (SHCIL), has confirmed that LIC's funds for its bids in the ONGC auction were available with the custodian by 1-44 p.m. on that day.
After 1-44 p.m. on Thursday, not a single rupee came in from LIC towards any bids under its name for the auction. All the orders from LIC were punched into the exchanges computers before 3-30 p.m. and also adequate funds were available with the stock exchanges before 3-30 p.m., said Mr Ashok Motwani, CEO and Managing Director of SHCIL.
Mr Motwani, however, declined to comment on whether SHCIL had confirmed to NSE the orders placed by brokers in the National Stock Exchange on LIC's behalf on that day. Nine high-value orders from LIC with proper financial backing (from IDBI Bank which is banker to LIC) were placed on the NSE during the last half-an-hour of the auction time (between 3-00 p.m. and 3-30 p.m.) by brokers, it is learnt.
However, the buzz is that the orders could not be executed before 3-30 p.m., the time the auction ended, although the orders were punched in and adequate funds were made available.
Informed sources say the catch lay in a requirement of the NSE for the custodian to confirm the bids. The buzz is that the custodian had failed to confirm the order, leading to the delay. It is general practice for custodians to confirm the orders placed in NSE for institutional trades. Either the custodian will confirm or remain silent. There is no practice of custodian rejecting the order on account of fund availability issues. Now, the stock exchanges say there were certain buy orders that were not immediately confirmed or were ‘erroneously' rejected by custodians.
With LIC set to walk away with a chunk of the ONGC shares on offer, there are strong doubts that the insurance behemoth may have been roped in at the eleventh hour to help save the Government from embarrassment.
While the stock exchanges have put the blame at custodian's door for the confusion at the end of the auction process, Mr Motwani did not want to get drawn into the nature of hiccups and who played an ‘important' role in the uncertainty over the outcome of the auction.
Till late evening on the auction day, there was no official word on whether there was demand for all the 42.77 crore shares that were on offer under the auction. This led to widespread speculation that LIC was brought in at the last minute to do the rescue act.
There is still no clarity on where the goof-up happened. As for the delay in announcing the outcome of the auction, the stock exchanges, SHCIL and the Government are claiming victory over the final outcome. As for SEBI, the buzz is that all this happened with the blessings of the capital market regulator. So, where is the question of investigation, when all of them were kept in the loop, asked an exchange official.
“I don't want to get into any blame game. What is important is that we have been able to complete a big transaction through an innovative mechanism of auctions. We are happy with the new structure and satisfied with the outcome,” Mr Motwani said.
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