Issue subscribed by friendly investors to the extent of 98.27% in last ten minutes
ONGC which was expected to be the big ticket divestment turned out to be a big dampener. The issue which was for 5% of the company’s equity was an offer for sale by the largest shareholder the Government of India. The issue was for 42,77,74,504 shares and was at a floor price of Rs 290. The floor price fixed was at a premium of Rs 6.45 or 2.27% to the closing price of Rs 283.55 on the 28th of February. It was quite strange for a premium to be fixed for a follow on offer of a listed security.
It appears from the kind of news flow that India’s largest insurance company LIC has bailed out the issue with support from SBI, India’s largest PSU bank and a host of other PSU banks. This puts the entire process of divestment under a cloud and one wonders that the feedback that the company had received from overseas investors is based on what premise. It appears that these investors have shied away from the auction looking at the floor price and also the fact that no one in the company or the government is clear on the subsidy sharing formula for oil pool deficit. These issues need to be addressed for the growth of this company and if meaningful divestment is to happen.
Coming to the auction itself which was during the course of the normal trading day saw bids for amere 1,43,85,097 shares at 3.20 pm with just about 10 minutes to go for the auction to conclude. Thereafter the systems refused to update and there was no communication or information available on the websites of BSE or NSE. News channels kept on giving all sorts of updates quoting sources from the Exchanges. One wonders when there is a public auction how selective information can be given.
The next one heard was that the two exchanges were updated to show that the issue was closed having received final bids for 42,04,16,170 shares which was 98.27% of the issue on offer. The two exchanges released a joint press release at the end of the day or almost midnight which is quite intriguing. The text of the press release is reproduced below.
Joint Media Release
BSE / NSE
“ONGC Offer for Sale (OFS) was completed today using the secondary market mechanism created by BSE and NSE.
The final demand was for 42.03 crore shares against an offer for 42.77 crore shares.
While the buy orders at both exchanges reflected a demand of 29.22 crore shares around the market close, there were certain buy orders which were not immediately confirmed or were erroneously rejected by custodians due to a mismatch at the custodian end, even though, the orders were funded.
These orders were not reflected in the demand of 29.22 crore shares as specified above. After rectification of these errors, the final demand was for 42.03 crore shares as stated above. Monies and orders received after normal market close have not been considered by the exchanges in the offer for sale.
Exchange systems operated normally and smoothly and there were no glitches.”
The questions that arise from this press release are as to why the figure of 29.22 cr shares was not available on any exchange publicly and only available to media channels? Are the exchanges supposed to disseminate information publicly or selectively? When there were no system glitches why an announcement to that effect could not be made? By not doing so it has created speculation as to the cause of delay and apprehension of manipulation being done to bail out the issue? Clearly things have been done in very poor taste and the Capital Market regulator SEBI must take to task the persons involved in this goof up. The merchant bankers and the stock exchanges are clearly at fault for all the mess that has been created and for keeping things under wrap without keeping people posted about the same.
One other feeling or theory being talked about after the conclusion of the ONGC issue is that there was a standby arrangement created for the issue with support from LIC and the PSU banks. This support was to be used after the investors whether retail, HNI, or Foreign have put in their bids. The response was so poor that it took some time for the standby arrangement to have the funds credited as this auction was a fully funded offer and had to be bid with supported funds. This is why the exchanges in their joint press release had to specifically mention that no bids after the normal market close were considered.
It is also pertinent to note that though the quantum of shares bid have been mentioned, till this morning details about the price and or break up of buyers in terms of institutional investors etc. is still not available. The equity price of ONGC closed at Rs 288.20 while the futures of ONGC were trading lower at Rs 287.45. There would be volatility in the stock price movement of ONGC today. and the way the issue has been handled is clearly a cause for concern.
One hopes that like the investigation ordered in the IPO scam where action was taken against 7 companies and their merchant bankers, this case is also similarly investigated.
