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Since 1st March, 1999
 
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Plan to space out large flotations

The ministry considers this necessary since several government-run companies and banks are coming out with public issues, worth Rs 10,000-12,000 crore, in the remaining months of this fiscal.

Senior finance ministry officials feel much of the problem of volatility stems from the sudden shift of resources by financial institutions, FIIs and high net-worth individuals.

At present, profit booking influences the movement of the market to a large degree. However, it has been observed over the past year that FIs and FIIs cash out of their previous stock pool to take the plunge into new issues. This, in turn, creates afinancial vacuum, causing stock prices to dip.

The finance ministry, along with Sebi officials, has been studying the wild swings on stock exchanges over the past few months.

The plan to stagger flotations is important because the government is contemplating bringing several high-value public offerings in state-run companies to bolster the newly set up National Investment Fund.

Finance ministry officials have long feared that a slew of PSU public issue could actually create a situation where money is sucked out of the market, forcing a free-fall of the kind that occurred when the previous government came out with mega offerings in oil PSUs.

The first to roar off the block could be a Rs 1,000-crore stock sale in Maruti Udyog. This is likely to be followed by a Rs 2,000-crore IPO from Indian Airlines. It will be followed by several bank issues, including those of Syndicate Bank. Flotations from other public sector companies are also in the public-offer pipeline.

In all, the state-run companies are expected to garner Rs 10,000-12,000 crore through these offers. Private companies are expected to bring in issues worth another Rs 8,000-10,000 crore.

“About Rs 20,000-22,000 crore will be raised in the next five months, compared with Rs 14,000 in the last six months ... hence the need to space out issues, especially the big ones,” officials said.

The government also feels there is a need to ensure there is “no overcrowding” of the market for PSU issues as that would hit not only the mood in the market but also the owner's share value.

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