NEW DELHI: Despite the poor response to last fiscal’s ONGC auction, the government is planning to use this route for divesting its stake in three other PSUs — OilIndia, Nalco and SAIL.
Speaking to FE, Mohd Haleem Khan, disinvestment secretary said, “the auction process saves time and cost since you don’t have to go for long drawn process and publicity. If a company is eligible for auction, then we would rather go for auction than prospectus based stake sale.”
The government proposes to raise R30,000 crore in the current fiscal from disinvestment. During 2011-12, the government could raised only about R14,000 crore as against the target of R40,000 crore. The lukewarm response is also blamed at badly managed auction offer of ONGC.
On March 1, the government had auctioned 5% stake in ONGC, raising Rs 12,767 crore, or 98.3% of the amount it desired. The auction, however, was marred by technical glitches and managed to get through only after the Life Insurance Corporation (LIC), another state-owned firm, picked up 95% of the shares on offer.
The state-owned firm was the first to use the auction route or offer for sale (OFS), a separate window introduced by Sebi in February to facilitate promoters to offload holdings in listed companies.
Khan says: “I’ve a strong feeling that whenever the OIL offer is made, it will be through the auction route. The company has long been showing interest in this route”.
The cabinet note on divestment of OIL, Neyveli Lignite have already been floated but no time line has been set as of now. The disinvestment secretary also added that Nalco is also in the pipeline for auction route.
Khan blamed the the stock exchanges for troubles over ONGC auction. The exchanges failed to provide information on the indicative price. Also the floor price indicated by ONGC was higher than the market price on the day of auction. This led to some investors bidding at below the floor price, thereby getting rejected by the system. But the divestment department is optimistic that procedural issues will be sorted out soon with regard to the auction procedure.
The OFS and the institutional placement programme (IPP) are the two methods introduced to sell promoter stake in the open market.
Wipro, the only other company to have tapped the auction route so far, managed to mop-up just half its target.
Disinvestment plan for SAIL is being revised to cover only stake sale by the government as the company’s board has decided it does not require to raise capital.