The twin divestment of ITDC and OFS was completed with both issues being oversubscribed. ITDC received bids for 46.71 lac shares which was 108.93% of the offered quantity. The bids were primarily from the institutional category who are allowed to bid with 0% margin and 103.05% bids were from them. The 100% margins bids were a mere 5.88% of the offer size or 2.52 lacs. Allotment has been made at the floor price of Rs 70.

There would be a major problem post the OFS in ITDC as the last traded price on Friday was Rs 1,000. The share is in the periodic call auction which trade means its trade to trade segment. The market price has to fall from Rs 1,000 to under Rs 100 before the quantity of 42.88 lac shares offered by the government become freely tradable. This would mean about 50-52 trading sessions before the price reaches Rs 70. This means about three months if trading happens every single day. It would be worth mentioning that the last 10 trading sessions in the stock were over a period of seven weeks and prior to the divestment on Friday the previous trade had happened on the 24th of July.

I believe the best way to resolve this issue is to permit a special trading session where the price discovery of the stock is permitted as is the case with IPO’s or stocks which are relisted after demerger or any other reason. If this is done, the overhang of a huge price differential and the issue of virtually no trade would both get resolved. The added disadvantage of being traded in periodic call auction implies that someone needs to buy one share at a potential loss every day to ensure that the price comes down to the floor price.

The second OFS was from STC which saw bids for 112.52% of the offered quantity being received. Here again the bulk or 109.78% was in the 0%margin category while a mere 2.74% was from the 100% category. This again indicates that even though the share was offered at the current market price there were no takers from the investor category and the issue was subscribed by obliging LIC and PSU banks. The share closed marginally lower than the previous day atRs 74.25, a loss of Rs 0.40.

The third divestment was the QIP from Neyveli Lignite which was fully subscribed by Tamil Nadu state PSU’s. The price band was Rs 58-60. The share closed at Rs 53.05 with a big loss of Rs 2.65 or 4.76%.