Friday saw two different OFS’s (offer for sale) happening with one being from state run Hindustan Copper and the other from Blue Dart. Both these offerings were to reduce the promoter holding and increase the public shareholding. While in the case of Blue Dart the offer has made the company comply with the 24 public holding norms, Hindustan Copper has a long way to go.

Let us look at both these issues in some detail. We first look at Blue Dart which offered 14,31,937 shares at a floor of Rs 1,720 which was at a discount of Rs 337 or 16.38% to the closing price of Rs 2,057 on Thursday. The issue received excellent support and received bids for 51,83,605 shares at an average of Rs 1,833. The average price was a premium of Rs 113 or 6.56% to the floor price and a discount of Rs 160 or 8.03% to the closing price of Rs 1,933 on Friday evening. The share is expected to lose some ground on Monday when trading resumes. One may say with a reasonable amount of surety that the floor price of Rs 1,720 would become a long term support price for the company.

The other issue was from PSU company Hindustan Copper Limited which offered 3,70,08,720 equity shares and an option to offer upto 8,87,23,300 shares. The floor price fixed was Rs 155 per share a discount of Rs 111.30 or 41.79% to Thursday’s closing price of Rs 266.30. The issue received bids for 5,17,14,580 equity shares at an average price of Rs 156.56. The issue raised Rs 810 crs at this price. This average price was at a discount of Rs 56.49 or 26.5% to the closing price of Rs 213.05. It may be of interest to note that the stock lost 20% and closed at the down circuit. The other area of concern was the fact that the issue was subscribed by state insurer LIC and PSU banks led by SBI and PNB. This brings us to one question whether this is divestment or not. If the government is to receive money only by cajoling state managed institutions to invest in their offerings is it divestment or just changing the name of the entity who owns? Does it not amount to fooling everybody?

The government has a target of Rs 30,000 crs from divestment this year. A mere Rs 810 crs have been raised and certainly the figure is far away. The timing of raising the shareholding limit for LIC in individual companies from 10% to 30% a few days ago is a pointer in the direction things would pan out going forward. The government would sell and LIC would oblige by buying. God forbid if LIC was listed, one could just short LIC and make a killing. Whether this should be considered as a successful divestment or not is for readers to view and decide. In my view it’s a sham.

This article is posted on Monday morning after markets have opened. An update of stock prices for the two stocks is being given for comparison purposes. Blue Dart was trading at Rs 2030, a gain of Rs 30 for the day, while Hindustan Copper was down Rs 42.55 or 20% at Rs 170.40. The volume traded was a mere 2.72 lac shares. What is even disturbing is that the EPS of Hindustan Copper at this price based on the first half ended September 2012 earnings on an annualised basis is a mere Rs 2. The PE based on this earning means a PE of 85 and at the floor price would be 77. The stock has a long way to go in terms of reaching fair valuation and needs to correct significantly.

One hopes the government bites the bullet and prices these offer for sale at realistic prices.