Money Mar 1, 2012
ONGC's auction is not getting the response it was supposed to. The company has till 3.15 pm received bids for only 1,35,40,735 shares against 42,77,74,504 on offer. Total bids account for Rs 287 crore as compared to market expectation of Rs 12,000 crore.
BSE website says that 'Modification/cancellation of orders/bids will not be allowed during the last 30 minutes'. So has the issue devolved? Share price says so, which is already down to Rs 286, way below the floor price of Rs 290.
Modification/ Cancellation of Orders/Bids will not be allowed during the last 30 minutes.
With only 45 minutes of auction time left investors are either holding their cards close to their chest or are just not interested in the issue.
Given such a poor response, will the government really manage to meet its disinvestment target of Rs 40,000 crore?
Here are 5 things you must know about ONGC
• It is the largest oil producer in the country and has the biggest oil reserves in the country. It is also the 18th biggest oil company in the world and owns the largest oil assets compared to any other Indian company.
• A successful auction in ONGC shares is expected to pave the way for divestment in other public sector companies like heavy engineering goods firm BHEL and steel major SAIL. Infact, government sources have said that the oil ministry is planning to even auction state-run BHEL shares in the current fiscal. But given ONGC's performance, maybe its time the government give this a backseat?
• This is the first stake sale being done via an auction route where multiple orders from a single buyer are permitted.The minimum auction price values ONGC at 10 times 2012 expected profit. ONGC's profits are, however, understated by nearly Rs 50,000 crore on account of under-recoveries by the oil marketing companies. The company subsidises the latter to keep diesel, kerosene and LPG prices artificially low.
• News reports had suggested that some sovereign wealth funds from the United Arab Emirates and Kuwait were interested in picking up ONGC's stake from the government.
• ONGC sale reflects the government's desperate need to raise cash before the budget, due on March 16. It is also a sign that equity market conditions, despite a slowing economy, are good enough to merit a sale of the family silver.
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