Now that the dust has settled on the government’s NTPC follow-on public offer (FPO) fiasco, it’s interesting to note that by any sensible measure, the issue was undersubscribed by at least about 50 per cent. Going by reports, it seems that about Rs 4,700 crore out of the Rs 8,300 crore subscription was from the State Bank of India and the Life Insurance Corp, and possibly other public sector banks and insurers.
Had these events happened in a private business group, it would probably have crossed the borderline of legality. Basically, this sham FPO amounted to transferring assets from the state-owned bank and the insurance company to an unrelated activity owned by the promoters.
What demonstrates the promoters’ greed beyond all doubt is that the bank and the insurance company were the highest bidders in the issue, and bid several percentage points higher than the ruling market price and the other bidders. Had this been a private business group, the promoters should have been behind the bars by now. SEBI, RBI, IRDA and the various other regulators in this drama would have been asking some tough questions from the promoters and their advisors.
The way the issue was priced showed that greed got the better of common sense. The entire focus was on squeezing the most money possible out of the investors’ pockets. Forgotten were all those grand statements about the public sector being owned by the public.
Even as the issue was open, one heard officials floating conspiracy theories about how bear cartels had hammered the price down from 230 to 200 and how they should be investigated. In reality, the stock had spent most of the previous six months at around 200. Briefly, in December, someone — probably the government’s hired bulls — jacked it up to 230 or 240 but failed to sustain it there.
Going forward, it should be clear that unless the disinvestment programme is done in a very different spirit, it is going to be a year-long fiasco. As it would deserve to be.