Hindustan Copper Limited raised Rs 810 crs for the government and kick started the divestment for the financial year 2012-2013. There are about four months to go and the target an ambitious Rs 30,000 crs. The Divestment department expects us to believe that by offering a 41% discount to the closing price of the stock they have offered value for money to investors and that investors have lapped up the issue.

Trading data shows up differently. There was an arbitrage opportunity which has been used by investors and the smart ones have made money. The table below gives detail of traded quantity on the BSE and NSE on the 23rd which was the day the sale (OFS) was made. It also contains traded data of Monday and Tuesday along with delivery made. The data clearly points out that the total delivery made in these three days is a mere 71.26 lac shares which is about 31.40% of the traded volume on these three days. If one compares this with the bids received in the OFS it is a mere 13.78% of the same.

The final bid quantity of 517.14 lac shares was at an average price of just under Rs 157 against the floor price of Rs 155. The stock has already broken that price and closed at Rs 153.45 on the BSE and at Rs 153.40 on the NSE. The issue was subscribed by LIC and PSU banks led by SBI and PNB. Even at the current price the loss would be negligible and one would hope that state run PSU banks that were cajoled and coerced into applying for these shares are booking losses and exiting. The government needs to sell another 370 lac shares of Hindustan Copper to reach a level of 10% public shareholding. Incidentally the SEBI rule is 25% public shareholding by June 2013.The price for the next round of divestment would be significantly lower than the present level on fundamental grounds. The EPS for Hindustan Copper in the first six months ended September 2012 was Rs 1 per share. Annualising the same the EPS would be Rs 2 for the year and at the offer price of Rs 155 the PE would be a staggering 77.5 times annualised EPS for the year ending March 2013.

This PE is in no way cheap or attractive for investment. Since the last three days the stock has closed at down circuit filter on each day losing 20%, 20% and 10% each day. The circuit filter would remain at 10% unless it again closes at down circuit filter on Thursday, in which case it would change to 5%. I believe retail and HNI investors who bid for the share in the OFS have already exited the counter. The selling would continue from the institutional investors and that would keep the share under pressure. What would be interesting to watch out for would be who the buyers are?