LUKEWARM investor response to the Indian government’s $2.57bn (£1.62bn) sale of a stake in energy giant ONGC has cast a shadow over New Delhi’s plans to revive its privatisation drive, analysts said on Friday (March 2).
The government had to scramble on Thursday (March 1) to dispose of the five per cent holding it was selling in the state-controlled oil and gas producer after hoping the offer would be heavily oversubscribed.
“ONGC, which was expected to be the big ticket divestment, turned out to be a big dampener,” said Arun Kejriwal, an independent market analyst.
Investors took up just 98 per cent of the offering, marking a stumbling start to the government’s bid to resurrect a privatisation drive stalled last year by weak markets and policy paralysis, analysts said.
Analysts said the high price deterred investors from the hitch-ridden sale that ranked among India’s five biggest equity share sales.
“The offer was priced too high, it should have been sold at a discount to the market price as is normally done – not at a premium,” Sonam Udasi, research head IDBI Capital, told reporters.
ONGC’s shares slid four per cent on Friday before recovering partially to close down 2.22 per cent lower at Rs281.45 ($5.68/£3.58) – significantly below the government’s offer price of Rs290 ($5.85/£3.69).
Just under 70 per cent of the stake was sold before the offer closed on Thursday afternoon, according to stock exchange websites that failed to update.
The government was forced to enlist state-run Life Insurance Corp to scoop up the rest of the shares, according to media reports. LIC declined to comment on whether it had bought the shares in India’s largest oil and gas producer.
It was the first privatisation through a newly approved auction route.
The auction, which can be completed in one trading day and avoids elaborate roadshows, was billed as a swifter way to raise funds than through a public offering.
Finance Minister Pranab Mukherjee said on Friday the auction route was a “highly experimental option” and the government would “have to analyse it and then make assessment” about further sales of government companies using the same method.
However, he termed the sale a “great success.”
