India kicked off its plan to raise 400 billion rupees ($6.92 billion) through asset sales this fiscal year with the sale of a stake in trading firm MMTC Ltd, whose discounted share offering was oversubscribed on Thursday.
The government plans to sell stakes in other companies such as Coal India Ltd, Indian Oil Corp and Bharat Heavy Electricals Ltd to cut its fiscal deficit, a top priority for finance minister P Chidambaram.
The successful sale of a 9.33% stake in MMTC, worth about $96 million based on the minimum bid price, is another shot in the arm for the government after ratings agency Fitch signalled its approval of efforts to rein in the deficit.
The Indian government, which currently owns 99.3% of MMTC, had offered 93.3 million shares for a minimum bid price of 60 rupees per share.
The single-day auction received bids for 108.4 million shares at an indicative weighted average price of 60.86 rupees per share.
The government was forced to set the minimum bid price at a discount of over 71% because the stock is illiquid and not easily tradable, a company source told Reuters.
Bhavesh Chauhan, an analyst with Mumbai-based Angel Broking, had advised clients not to buy shares in the offering, saying that lower iron ore exports and a possible drop in gold imports into India would weigh on MMTC's revenue.
Shares of MMTC closed down 10% at 189.05 rupees, while the broader market ended about 1% lower. ($1 = 57.7700 Indian rupees)