Circa March 2004: The divestment target was looming large. And, like always, time was running out. The then divestment minister had told the lead bankers in no uncertain terms that they have to push through the initial share sales of Oil and Natural Gas Corp (ONGC) at any cost.
Bankers were not too sure, but one of them had a trick up his sleeve. The issue opened on March 5, 2004. In a few hours, the erstwhile Crisil Market Wire published a story which said Warren Buffett, billionaire stock market investor “is said to have” invested $1 billion in the public issue in his first investment in India, quoting a senior official at one of the lead managers.
The Buffett buzz added the much-needed spice and the mega offer was oversubscribed eventually. Retail investors flocked the issue so much that the now-defunct registrar, MCS, could not handle the sheer volume, resulting in allotment goof ups that took several years and a C B Bhave to undo. Curiously, after the issue closed one of the bankers ‘clarified’ that Buffett did not invest at all.
Cut to 2012. The government has a new divestment target, complete with the old problem of falling miles short of it. Again, the government is planning to sell ONGC shares. And, the bankers are at it again, too.
This time they chose the Warren Buffett of institutions – CalPERS. Media reports quoting banking sources have alluded to the giant California pension fund, showing interest in the divestment of ONGC. Great news, indeed. But there is a small problem.
In May 19, 2006, the Financial Express (FE) reported CalPERS has decided it will not invest in a few Indian companies, including ONGC “until the government of Sudan halts the genocide that has resulted in egregious human rights violations”. That was long ago, you may argue.
But as late as May 2011, CalPERS divested its entire holding in Mangalore Refineries, a subsidiary of ONGC, worth $1.1 million for not responding to its concerns. ONGC and its arms have apparently not halted their operations in Sudan, Sudan government has apparently not halted what it has been doing and CalPERS will not invest in ONGC until one of these ends.
Thankfully, this time around, there are no retail investors to be taken for a ride as the sales will happen through an institutional placement. But, does that justify lying for selling?
Why do bankers have to resort to such acts? Should investors not believe anything they say? Or do they use it only in case of ONGC? If so, what’s wrong with ONGC?
Is it the boiling oil, which is just a few hundred rupees away from its all-time high (though in dollar terms it looks more benign) and the spiraling subsidy burden? Or is it the attitude towards investors’ concerns after the money is raised?
The FE article above quoted R S Sharma, then finance director, ONGC, as saying, “We don’t care if CalPERS will invest with us or not. We have more than 300 FIIs as our investors. We will continue operations in Sudan.”
