ONGC issue may be over subscribed; may fetch over Rs 12.5k cr
Government's stake sale in ONGC through auction is likely to be over-subscribed, as the company's share was trading above the floor price of Rs 290, and fetch more than Rs 12,500 crore for the government, experts said.
They further said that the auction route may be preferred for future disinvestments.
The auction of 5% of government's stake in the oil major will take place on the BSE and the National Stock Exchange.
"The issue is expected to be oversubscribed and the auction would fetch over Rs 12,500 crore to the government," Wellindia Head Equity Research Vivek Negi said.
He, however, said that market was expecting a floor price of Rs 270 apiece and not Rs 290 as fixed by the Empowered Group of Ministers (EGoM).
ONGC' share on BSE and NSE closed at Rs 293.35 and 293.20 respectively, up 3.46 % from previous closing.
Running against time to meet its Rs 40,000 crore disinvestment target for the fiscal, the EGoM headed by finance minister Pranab Mukherjee decided to sell the Centre's stake in ONGC through auction and set the floor price higher than the previous day's close on stock exchanges.
"The premium indicates confidence of the government in ONGC's share sell," Strategist & Head of Research, SMC Global Securities Jagannadham Thunuguntla said.
"The issue would get maximum interest from institutional investors and mutual funds," Thunuguntla said adding "if this auction is successful, as is expected, we hope this route would be more frequently used for disinvestment next fiscal".
CNI Research Head Kishor Ostwal said, "the issue would be over-subscribed. The share sell process would get huge interest from investors, but may not attract retail investors as there is no discount".
Expecting a rally in the share prices of ONGC, market experts hope that in a month's time it would be trading around Rs 320 apiece.
Capital market Regulator Securities and Exchange Board of India (Sebi) had issued norms allowing promoters to sell stake by way of auction, through a separate window on BSE and the NSE, which has to be completed within a day.
The auction route or 'offer for sale of shares by promoters' involves very little paperwork and the whole process can be done in just a trading day.
This is the second disinvestment this fiscal, after mopping up Rs 1,145 crore through stake sale in Power Finance Corp.