Successful sale

Arun Shourie, the minister for disinvestment, must be a happy man. After an initial hiccup, his disinvestment programme has gone like a breeze.

The ONGC sell-off has brought forth a torrent of cash, all of Rs 28,000 crore worth of it in a single day when Mr Shourie would have been happy with just Rs 10,000 crore in the course of a week.

Most experts had concluded that bunching so many IPOs wasn't a very good idea. They had a point, but the market has demonstrated the depth to absorb the flood of paper. The reason is simple.

Whichever way one looks at it, the shares on offer were priced attractively at a time when investors (domestic and international, retail and institutional) were hungry for options.

For instance, ONGC shares, like the shares of all large public sector monopolies, have been pushed at a price-earning multiple that is reasonable by current industry standards, and only those without money to spare would have stayed off from the market.

What this has meant is that the market for IPOs, after having been in the doghouse for years, has revived with a bang.

At least some of the credit for this must go to Mr Shourie who stuck doggedly to his guns "" sometimes, as when the first floats received a poor initial response, a bit too doggedly. The tactics he adopted then should not be repeated.

Now that the ownership of ONGC has become more dispersed, the government should treat the company differently. After the administered price mechanism was dismantled two years ago, it was widely expected that the government would stop micro-managing the oil sector.

That expectation was belied, for reasons that do not stand up to scrutiny. Now another opportunity has presented itself for the government to prove that it is serious about getting out of the way of business.

One must hope that whoever forms the next government will appoint a suitable minister because, as the country has seen all too often, some ministers succeed in defying government policy. The oil sector is altogether too important to be left to individual caprice.

Success can create its own problems. It will be recalled that ministers and MPs (and of course the opposition) had opposed strategic sales on the grounds that they provided an opportunity for crony capitalism.

Mr Shourie, on the other hand, had argued, rightly, that the way to get best value was through strategic sales because private players are then paying a control premium that cannot be asked of retail buyers.

The perverse argument today is that public offers of shares are fetching a better price than at the time of strategic sale "" a case in point being CMC.

This misses the point that it is partly because CMC is now under private management, by a group that understands the software business, that CMC shares shot up immediately after the initial sale "" allowing the government now to cash in. Comparable value appreciation is not there in all cases, IBP being one example.

But even if it were, the fact is that the stock market is in a buoyant mood today and prices are better all round.

Whether the government should do public offers of shares or decide on strategic sales, depends therefore on the specifics of each situation. What is clear is that disinvestments can now be speeded up since the market has demonstrated its ability to absorb a lot of paper.