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Retail investors looking to invest in ONGC follow-on public offer (FPO) can look forward to a discount of five per cent. With a view that ONGC shares should be widely held by the “aam aadmi”, the company has been pushing for a maximum permissible limit of discount to retail investors plus some reservations at the discounted prices for the employees.
The Government proposes to divest five per cent of its stake in ONGC which would bring down its stake in the company to 69.14 per cent. The Government expects to mop up Rs 10,800 crore through the FPO, expected to hit the market in March.
To make ONGC FPO attractive and affordable for retail investors, the company has also gone for a stock split — to split each share of ONGC into two.
It would mean share with a face value of Rs 10 each will be split into two shares of Rs 5 each.
When a stock is split, its price falls in proportion to the split ratio. As the price comes down, the stock becomes affordable, particularly to retail investors, enhancing the liquidity in the bourses.
The stock split does not, however, alter the market capitalisation or the valuation of the company.
Within reach
The company has also gone for 1:1 bonus issue (one share for every share held). Mr D.K. Sarraf, Director (Finance), ONGC told Business Line that “Because of the stock split and bonus shares, the market value of the company shares will come down making it more within the reach of retail investors.”
Asked whether ONGC FPO will see an anchor investor, he said, “It is for the Government to decide.” An anchor investor is the first investor in any round that provides subsequent investors a degree of confidence. Typically an anchor investor will know the company and have a high degree of confidence in the project. The anchor investor may even have invested in other projects with company. However, the shares allocated to anchor investors will have a lock-in period of 30 days.
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