The chances of substantive disinvestment in the current financial year and in subsequent months are dim after the government's ONGC auction experience. Disinvestment Secretary Mohammad Haleem Khan told Business Standard, “Everybody wants to learn from this experience. Once we know that this is a reliable and sensible way of doing things, we can look at the other candidates.”
He said the policy associated with auctions was in place and had no problem. He, however, stressed, “We want to do it but we are not in a hurry to do it. We will thoroughly analyse the process part first.”
Finance Minister Pranab Mukherjee also said the government had decided to study the auction process before going ahead with stake sales in other companies.
On the prospects of further disinvestment in the current financial year, Khan said, “This fiscal, I don’t expect much more. NBCC is already scheduled for March and it looks like we are done for 2011-12 unless some company comes with a surprise buyback proposal, which I am not aware of.”
The Cabinet cleared the buyback option for Central Public Sector Enterprises yesterday, as the auction of five per cent government stake in ONGC was on. The auction and buyback modes have been identified to push disinvestment besides the IPO and FPO routes.
The last-minute glitch in executing orders placed by LIC in the ONGC auction resulted in confusion yesterday.
That has led to the review of the process before it is applied again.
Khan said there was nothing abnormal in what happened. “I think it was the first auction we conducted. The size was big. Ideally speaking, everybody would say that nothing should go wrong but I don’t think something has happened which we should take as the heavens have fallen. I wish the real-time reconciliation process could have been smoother.” He hoped lessons would be learnt quickly and there would not be any problem the next time.
The government on Friday said it received an average price of Rs 303.67 a share of ONGC, 4.71 per cent higher than the reserve price in yesterday's auction, thus garnering a total of Rs 12,766.75 crore. The ONGC stake sale was subscribed 98.3 per cent. Against an offer of 427.7 million shares, the final demand was for 420.4 million shares.
On how the government had received the result of the ONGC auction, the disinvestment secretary said, “Auction has to be distinguished from a prospectus-based FPO. How many times it has been subscribed should not be the criterion, you may look at the price at which the shares have been subscribed. I am happy with 98 per cent-plus.” He said with the buyback mode available, companies would look at it as a better treasury management option and not merely a disinvestment tool.
On the poor response from investors to the auction, disinvestment ministry officials said the two main reasons were lumpiness in FII inflows (Rs 35,000 crore) in February and the high floor price. Foreign investors expect a discounted price. But, the price was fixed at a premium. The government was contemplating a price of Rs 260-270 a share initially but as the share price rose before the auction, it was fixed at Rs 290, they said.
