Oil India OFS sees over 2 times demand

Govt was selling 60.11 mn shares, or 10% co's stock, had set a floor price of Rs 510/share for bids

The government today mopped up more than Rs 3,000 crore by divesting a 10% stake in Oil India, taking this year's disinvestment kittty to over Rs 10,000 crore.

The centre successfully managed to sell over 60 million shares in the petroleum exploration navratna at about Rs 520 apiece through the offer for sale (OFS) route to raise around Rs 3,100 crore. The issue attracted bids for 154 million shares worth nearly Rs 8,000 crore, about 2.5 times the shares on offer.

Good response to the Oil India offering gives the government much-needed boost as it looks to launch the NTPC mega-offering next week.

The Oil India issue attracted demand from broad category of investors including foreign institutional investors (FIIs) and retail. As per an investment banker handling the issue, FIIs invested over $500 million (Rs 2,700 crore), while state-owned insurance major LIC invested more than Rs 1,000 crore.

Shares of Oil India today closed at Rs 525.55, down Rs 13.65, or 2.53%. Meanwhile, the benchmark Sensex today ended at 19,781.19, down 113.79 points, or 0.57%.

The government set the floor price, the minimum price for the share-sale, at Rs 510, a 5% discount to Oil India's closing price on Thursday. Most brokerages had advised their clients to participate in the OIL India OFS.

Another investment banker said as Oil India isn't present in the futures and options segment, most of the participation came from genuine and long-term investors.

Oil India was the first issue to hit the market after the market regulator Securities and Exchange Board of India (Sebi) simplified OFS rules by allowing institutional investors to bid without any upfront payment. Almost equal amount of bids came through the 100% margin route and the new route, which has no margin requirement.

Investors bidding without any upfront payment are not allowed to modify or cancel bids and their trades settlement happens a day later, as per norms.

With today's share-sale, the government has raised a little over Rs 10,000 crore by selling its holdings in four companies—Oil India, NMDC, Hindustan Copper and NBCC—so far during 2012-13. The centre has so far achieved only a third of the Rs 30,000 crore-disinvestment target set for the current financial year.

The government is likely to sell nearly 10% in NTPC on February 5.

Next week's NTPC offering, which is expected to fetch about Rs 12,000 crore, will take the government close to the disinvestment target. Success of the disinvestment programme for 2012-13 is critical to contain the fiscal deficit.

The government has also identified other companies including SAIL,MMTC, Neyveli Lignite and Rashtriya Chemicals and Fertilizers ( RCF) as disinvestment candidates for 2012-13.