Investors dump ONGC auction; floor price plays spoilsport

The government's Rs 12,400-crore auction of its shares in Oil and Natural Gas Corp (ONGC) today came a cropper as bids received were only for less than 70 per cent of the issue size.

Country's main stock exchanges BSE and NSE updated bids every half-hour throughout the day, but stopped doing so 10 minutes before the close of the auction at 1530 hours. At the last count, 29.22 crore shares for the 42.77 crore offered for sale at a minimum price of Rs 290 a piece were bid, exchange officials said.

The National Stock Exchange and the Bombay Stock Exchange said they were still tabulating the total bids, but there was no official word on the final tally even after more than four hours of the close of the bidding.      

Five per cent government share sale in ONGC was intended to restart the stalled disinvestment programme to narrow a budget deficit that is already exceeded its target.

Big foreign institutional investors seemed to have dumped the issue after a ministerial panel on Tuesday set the floor price for the auction at Rs 290, a 2.3 per cent premium to that day's closing price.

Oil Minister S Jaipal Reddy in the morning said the response to auction sale was on "expected lines" and expressed confidence that "our issue will get adequate response".

But later in the evening, he said he did not have the final official tally of the bids received. "ONGC investors are mature enough" not to get swayed by the poor response, he said.

In the first auction of a state-run company's shares, the government planned to sell 427.77 million shares, which would have trimmed its holding to from 74.14 per cent to 69.14 per cent.

The long-delayed ONGC sale, set to be the biggest equity offering in India this year, was part of an effort to raise Rs 40,000 crore. At 29.22 crore bids, the government will get about Rs 8,500 crore.

In the event of the total number of orders received at or above the floor price being less than the number of shares being offered for sale, the government would have the right to either conclude the sale to the extent of subscription or cancel the sale.

The shares would be allocated on 'price-priority' basis, meaning the bidders at 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 0915 hours and closed at 1530 hours.

After an initial spike of about one per cent, ONGC shares had also turned weak and even slipped below Rs 290 level by afternoon trade. The stock finally closed 1.87 per cent down at Rs 287.85 at BSE.

Analysts said that a poor response to the bidding could be attributed to the fact that ONGC shares were trading very close to the offer price in the secondary market and even slipped below the floor price by afternoon trade.

The government on Tuesday decided to offload five per cent stake in ONGC through the auction route and the planned sale could fetch the government about Rs 12,000-13,000 crore.     

The sale of shares took place at a separate window of the two bourses. Any modification or cancellation of the orders would not be allowed in the last 30 minutes.

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