Hiccup before hurrah ONGC auction scrapes through

OUR BUREAU

New Delhi/Mumbai, March 1: The government's 5 per cent share sale in ONGC Ltd through an auction, with estimated proceeds of Rs 12,000 crore, has managed to sail through after some nail-biting suspense that led many to believe that the exercise had fallen flat, initially, only to get resurrected by a late government intervention.

Hectic parleys were held for more than four hours after the end of the auction process at 3.30pm, and a final tally of the bids remained elusive for that time.

After putting the final bid tally after the end of the auction at about 22.9 crore shares, as against a total offer size of 42.77 crore shares, the stock exchanges later said that the issue had got fully subscribed in the auction, where the floor price was fixed at Rs 290 apiece.

Late in the night, finance minister Pranab Mukherjee said the government had raised Rs 12,666 crore from the auction. "It is a great success… Our latest figure is now Rs 12,666 crore, which comes to 98.3 per cent subscription," he told reporters.

Speaking to reporters, Siddhartha Pradhan, additional secretary in the department of disinvestment, said the issue had got fully subscribed, and market regulator Sebi had been asked to look into the technical glitches because of which some bids could not get registered.

As reports earlier in the day were not encouraging with bids worth about Rs 8,500 crore, the government appeared to have nudged the public sector giants, including the LIC, to pitch in with their bids and help the issue sail through.

Pradhan said the bids should have come in for shares worth about Rs 11,800-11,900 crore, and the final proceeds could even go beyond Rs 12,000 crore after all the tabulation.

The glitches took place because of many bids coming in at the last moment and the system could not handle them, he added.

"There was difficulty in uploading bids. Complaints came in thick and fast. Uploading is still on at the exchanges for the bids received before 3.30pm," Pradhan said at a late-night press conference.

When asked whether the government has asked the public sector institutions to bail out the issue, Pradhan said: "We have not asked any one (to bail out)... ONGC shares are undervalued as compared to the peer group."

Sources said various rounds of meetings took place among the government officials, stock exchange executives and Sebi personnel after the closure of auction.

There were reports of a technical error committed by the brokers as the software for the auction was installed only yesterday, and there was just a day of mock trading.

Sources in the stock exchanges categorically said that there were no system glitches on their platforms.

The problems occurred because of issues related to custodian accounts of the bidders and they were later sorted out, they said.

Divestment exercise

A poor show by ONGC share sale, through a one-day auction, as was evident from the earlier exchange data, could have also reflected badly on the government's overall disinvestment programme.

The government had targeted to raise Rs 40,000 crore through disinvestment in the current fiscal but had been able to raise just over Rs 1,100 crore prior to the ONGC issue.

After the sale of 42.77 crore shares, the government holding in ONGC would decline from 74.14 per cent to 69.14 per cent.

Sources said that most of the bids could have come from domestic institutions and state-run LIC could have pitched in strongly for the share sale in the country's most valued public sector company.

No single buyer, other than mutual funds and insurance companies, would be allocated more than 25 per cent of the size of the offer.

The shares would be allocated on a "price-priority" basis, meaning the bidders at the highest price would be allotted shares. The bids were mostly in the price range of Rs 290-293 per share for the auction, which commenced at 9.15am and closed at 3.30pm.

Marketmen offered two reasons for the initial flop show. First, the price of the issue at a floor of Rs 290 per share is perceived to be too high considering the prevailing market price. Second, a lack of clarity on subsidy-sharing and the burden that ONGC was expected to shoulder had further dampened sentiment.