New Delhi, March 2: To give a fillip to the Oil and Natural Gas Corporation’s public offer, the Securities and Exchange Board of India (Sebi) has permitted lead managers and book runners to issue participatory notes to attract foreign investment.
Billed as the biggest public issue of shares, the government is expected to rake in over Rs 10,000 crore from the sale of 14.25 crore shares of ONGC. The issue opens on March 5 and closes on March 13.
However, the lead managers will have to fulfil certain conditions related to disclosure norms of the foreign funds while issuing the participatory notes.
The market regulator had earlier issued a clarification in late January saying participatory notes could be issued to “regulated entities” only. They need not be registered in India, but must be registered with some statutory authority. This rule applies to everyone, including the investment bankers managing the ONGC public issue.
The government had requested Sebi to relax the ban on participatory notes for the ONGC issue as it could prove crucial to ensure the success of the 10 per cent stake sale in the country’s biggest corporate enterprise.
With Sebi allowing lead managers and book runners to issue participatory notes, roadshows for the ONGC public offer will now be launched in the global financial centres such as New York, London and Boston to woo foreign funds.
The proceeds from the equity sale are expected to form the main contribution to meet the Rs 14,500-crore disinvestment target to rein in fiscal deficit.
Sebi has been permitting fund managers to use participatory notes but barred lead managers and book runners from using the instrument by which foreign funds not registered in India could participate in a public offer.
With large volumes of these high-value stocks being unloaded in the stock market, there is a serious concern over adequate liquidity being available in the hands of investors to buy them.
The government is also moving cautiously as the Indian stock markets are notorious for rogue operators who can manipulate the market to make a fast buck.
In fact, the current revival in the stock prices is also attributed to the fact that government-owned financial institutions have sold some of their mid-cap shares and picked up the PSU scrips on sale.
The government will be announcing the floor price of the ONGC share on March 4 on the basis of the market feedback given by book-running lead managers — Morgan Stanley, Merrill Lynch and Kotak Mahindra.
The lead managers claim that the recent fluctuations in the stock market were not likely to have a bearing on the price which would be based on the strong fundamentals of the company.
The current market price of ONGC has crossed Rs 760 per share and, with 1.46 million shares being offloaded, a huge amount of cash is required to generate a buoyant demand. The government has also reserved 10 per cent shares for company employees.