| Printer’s devil
Mumbai, March 29: The Oil and Natural Gas Corporation (ONGC) public offer process shuddered to a halt today after those in charge of allotment gave affluent individuals more new shares than they were entitled to.
MCS, the registrars to the issue, admitted it had “over-allotted” shares to high net worth investors — the stock market jargon used to describe rich applicants.
To contain the fall-out of the blooper, National Securities Depository (NSDL) and Central Depository Services (CDSL) froze all transfers made after 10.30 am for 48 hours.
Disinvestment minister Arun Shourie, speaking at a Dalal Street function later in the evening, reassured investors, saying “human error or a computer glitch” led to the mix-up.
Earlier, MCS informed NSDL it had “over-allotted” ONGC shares by mistake, mainly in the high net worth investor category, depository chief C. B. Bhave said. “We are trying to reverse all entries made today and the process should be completed this evening,” he added.
Shourie also hinted at swift damage control, saying officials from his ministry would work with those of NSDL, CDSL and MCS to resolve the issue in a couple of days.
Many of those who found more shares than they should have received, went to make a killing by selling what they found to be the excess in their depository accounts.
That sent the ONGC stock into a tailspin on exchanges, where it opened at Rs 811.05 — because of the excess allotment — only to plumb an intra-day low of Rs 780.
When these investors realised what happened, they made a beeline to buy back the stock— discovering they had sold shares that actually did not even belong to them.
The final buying binge drove the scrip to an intra-day peak of Rs 856.90 before it wound down to Rs 844.40 at the close. Such was the scramble that it emerged as the top traded share on BSE with a turnover of Rs 290 crore.
“This is sheer carelessness. It was the duty of the registrar and the lead-arranger to ensure smooth allotments. They goofed up miserably,” fumed a dealer.
Part of the blame even fell on individuals who benefited initially. Brokers said they should have waited till they got the official allotment letter, instead of relying on their demat account balance for the final word.
Back-of-the-envelope calculations reveal that allotment would have been 60-65 per cent of the applications made in this category. The retail segment would get full allotment because that portion was not subscribed fully.
By contrast, the high net worth investor category, saw over-subscription to the tune of 2.6 times. As a result, the registrars and the merchant bankers had to refund more than half of the application money in this segment. What happened instead was that MCS gave them full allotment — more than the shares reserved in this category.
“It’s a major irritant. It creates a lot of confusion in the market. The authorities should investigate how this simple process of allotment was messed up,” a broker said.
The high net worth segment in the ONGC offer was oversubscribed 2.6 times, while the retail portion was undersubscribed as small investors applied for only 90 per cent of the quota.
The offer saw the government of Singapore being allotted around 48 lakh shares worth almost Rs 360 crore at the upper price band of Rs 750.
The other big ticket investors to get allotment were Capital International which got 30 lakh shares worth Rs 225 crore. Life Insurance Corporation is also believed to have secured 30 lakh shares worth Rs 225 crore at Rs 750.