Only 6.01 crore shares were on offer; but investors sought 15.41 crore shares.
That, in a nutshell, is the extraordinary story of how the recently revised ‘offer for sale’ (OFS) norms of regulator Sebi gave a tremendous boost to the divestment of 10% government stake in state-owned Oil India Limited (OIL) which started on Friday.
The norms, modified in mid January, require disclosure of the indicative price (weighted average price of all valid bids) throughout the trading session.
In OIL’s case, the indicative price turned out to be Rs517.99. The government had fixed the floor price for the stake dilution at Rs510 apiece, a 5.6% discount to the closing share price of Rs540 on the NSE on Thursday.
As a result, the OIL offer on Friday was oversubscribed 2.6 times, by far the most successful OFS as the corresponding figure is 1.8 times for NMDC; 1.24 times for Hindustan Copper and 0.71 times for ONGC – an encouraging sign for similar stake sales in the pipeline.
“For the first time, the indicative price was visible to the participants throughout the day, enabling investors to participate accordingly. The price was also attractive. All this must have contributed to the OIL stake subscriptions,” said Arun Kejriwal, director at Kejriwal Research and Investment Services.
The 10% stake in OIL is worth Rs3,113.80 crore at Friday’s closing price of Rs525.80 (down 2.6%) on the NSE.
Meanwhile, the benchmark Nifty on Friday ended at 5998.90, down 0.59% from its previous close.
LIC alone bid for shares worth Rs3,000 crore (Rs2,000 crore on the NSE and Rs1,000 crore on the BSE).
LIC has been picking up shares selectively through the OFS route and the secondary market. The country’s largest life insurer also has stakes in NMDC and Hindustan Copper. It increased its stake in Cairn India during the December quarter.
Experts said the bid for 4-5 crore shares received in the dying minutes of the OFS might have been from LIC. By then, the issue had been fully subscribed.
The norms relating to margins also turned out to be a blessing for the OIL stake auction as investors who satisfied the 100% margin requirement upfront, can now be allowed to cancel or modify their orders.
Under the new regime, bidders can be allowed to participate even without paying an upfront margin.
The overall target for divestment proceeds for the fiscal year is Rs30,000 crore. Sale of NMDC stake had already raised nearly `6,000 crore; stake sales in Hindustan Copper mopped up Rs647 crore.
With this share sale, the government has raised a little more than Rs10,000 crore by selling its holdings in four companies — Oil India, NMDC, Hindustan Copper and NBCC— so far during 2012-13. It’s likely to sell nearly 10% in NTPC on February 5.
Next week’s NTPC offering, which is expected to fetch about Rs12,000 crore, will take the government close to its disinvestment target. Success of the divestment programme for 2012-13 is critical to containing a widening fiscal deficit.
The government is also lining up stake sales in SAIL,MMTC, Neyveli Lignite and Rashtriya Chemicals and Fertilizers (RCF) before this fiscal.