The Telegraph
Since 1st March, 1999
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Set alight before the float

Mumbai, Feb. 18: Shares of companies in which the government plans to sell its stake went through the roof today, sparking speculation about the runaway rise just days before the public issue carnival roars off the block.

ONGC, CMC, IBP and IPCL sizzled even as the government went into a huddle with its merchant bankers to arrive at the price at which it will sell its shares.

Disinvestment minister Arun Shourie’s Mumbai visit on Tuesday to announce the sale of IPCL equity heightened the excitement about the way the shares are going to be priced. Market watchers agreed it was his presence at the roadshow that set these stocks — which had not exactly had a dream run so far — afire. ONGC gained Rs 52.45 at Rs 769.40, CMC Rs 34.35 at Rs 565.20, IBP Rs 21.50 at Rs 723.05 and Dredging Corp Rs 32.50 at Rs 518.35.

“There’s no free lunch,” said Arun Kejriwal of Kejriwal Research and Investment Services about the expectations that shares will be sold cheap to retail investors.

The announcement of the IPCL floor price being fixed at Rs 170, and the maximum being kept open, showed the government’s confidence in the success of the issues. The IPCL stock closed at Rs 191.90, up Rs 11.55 or 6.40 per cent, over its previous finish of Rs 180.35.

The gains made by ONGC and others whose shares will be sold also belied fears that a divestment, or a public issue of listed stocks, will send pre-float prices tumbling.

Interest in the oil exploration major, the company the market values the most, was pumped up by a proposal to set up seven non-government firms as part of its drive to become a $100-billion integrated leviathan.

But, who are the buyers' Analyst Hemant Rustogi plumped for a tribe of investors which buys from secondary markets if it believes that it is fair value. “They are clearly buying on merit,” he said, adding it would be tough to grab a slice of the stocks in the IPO scrum. “With IPOs being oversubscribed many times over, it is better to buy from secondary markets,” he added.

The peaking PSU passion is in contrast to the GDR glut of the eighties, when scores of blue-chip stocks were pounded to make it cheap for foreign investors to get in. It was rumoured, but never established, that overseas players were behind the heavy hammering.

Market watchers concede that it is difficult to prove, even suggest, that share prices of companies are supported in any manner. What they do agree on is that small investors could turn highly sceptical of pricing if discounts are offered on shares that surged recently.

The spurt in a handful of companies where the government will part with its stake did not rub off on other shares. The BSE sensex was down 9 points at 6027.02 against Tuesday’s close of 6035.80. It hit an intra-day high at 6082.80, but could not hold on to those gains.

Index heavy-weights like Lever, SBI, Tisco, L&T, Satyam Computers, Infosys, Grasim, Bhel, Bajaj Auto fell on profit-booking. The volume of business was Rs 2573.93 crore, an increase from Rs 2538.57 crore on Tuesday.

HPCL, Reliance, Gujarat Ambuja, ITC and Tata Motors were among those which scored handsome gains. Institutional investors were few and far between on account of Mahashivratri.

Attributing the initial rally to a stocks upsurge on Wall Street last night, brokers said retailers and operators were believed to have booked profits at the prevailing higher price levels in a bid to divert investments in the forthcoming key public issues. The Nasdaq Composite index rose 27 points and Dow 87 points.

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