| Playing safe
Mumbai, March 7: The government stake sale in six blue-chip companies attracted a mixed response from small investors. Foreign institutional investors, however, lapped up the opportunity, facilitating a smooth sail for the epoch-making divestment process through which the government netted almost Rs 14,000 crore.
The retail investor’s approach to the public offers was expected, said sources in the capital market. Almost 50 per cent of the six offers was earmarked for qualified institutional investors, 25 per cent for affluent investors and the remaining for small investors.
“Ladies and gentlemen, the silver goes back to where it came from,” Dhirendra Singh, disinvestment secretary, had said at the ONGC roadshow here.
He wanted the equity component in the domestic savings market to rise from the current 3 per cent to a global standard of 10 per cent. But investors’ trend reveals that it may take more efforts on the part of the government to bring it to 10 per cent.
It is the foreign investors with deep pockets who have enthusiastically bid for the government silver, slated to raise almost Rs 17,000 crore in a span of one month from the primary market — perhaps more than what was collected cumulatively in the last five years.
Till Friday, foreign institutional investors had bid for 26.14 crore shares of ONGC, while local institutions and insurance companies had attracted a modest 83.79 lakh shares and 45.55 lakh shares, respectively.
Mutual funds have so far bid for 2.26 crore shares in the oil major touted as the energy security of the country. Small investors, considered a “follower segment” in merchant banking parlance, have so far bid for only 13,000 shares as against almost 3.5 crore reserved for them.
ONGC’s public offer was oversubscribed within 10 minutes of opening. Merchant bankers hope that the noise will attract small investors.
Similarly, foreign investors have bid for 46.99 crore shares in Gail’s public issue, which closed on Friday. Domestic financial institutions and mutual funds have bid for 2.8 crore and 8.4 crore shares respectively. Small investors have bid for 7.07 crore shares. This reflects a clear trend that the stock markets are getting institutionalised in the country.
Nimesh Kampani, chairman of J M Morgan Stanley, one of the three lead managers for ONGC’s book-built issue, said, “The issue was kept for the last, so that investors get a chance to invest in the five blue-chips being offloaded before it.” Otherwise, most investors would have exhausted their funds by investing in ONGC. The statement is significant as the timing of the issue was changed in a clever move by the government.
Merchant bankers said the response to the government’s divestment process was as expected. Dredging Corp received 2.25 lakh forms from the retail segment while IBP got 87,000 forms from small investors. “It cannot get better than these,” argued merchant bankers.
Ajit Sanghvi of MSS Securities, an institutional broker, says small investors prefer low-priced issues to high-premium issues. Hence, the small-investor segment has outnumbered foreign investors and local institutions in bidding for Power Trading and Petronet LNG.
In Power Trading, foreign investors had bid for 1.8 crore shares, while small investors attracted 4.4 crore shares. Even local institutions have been aggressive. They had bid for 7.4 crore shares in Power Trading, a low-priced issue with an upper price band of Rs 16. Mutual funds had bid for 17.65 crore shares in the new power trading firm. It is a similar story with Petronet LNG.
Retail investors did not show an overwhelming response to the public offers because some of these shares are listed and traded on the stock markets. They hope to trade in them if the prices do not escalate after the allotment.