Retail investors and institutions have not given a very excited response to the offer of disinvestment of NDMC. It is now being speculated that government of India’s proposed target of revenue from disinvestment in the year 2009-2010 may fall short by about Rs. 2400 crores.
This is being feared in the light of the fact that the bid for just 17% of offered shares were received on the first day. What is even more concerning is the fact that most of the received bids are not as high as what was being expected. Government hopes to sell around 33.2 crore shares which are equivalent to 8.3% of its stake in the enterprise. Each share has been priced from Rs 300 to Rs. 350. The last day to purchase this is 12th March 2010.
With only one day left for this issue, merchant bankers are hoping that they will get loads of bids on 12th March. But they are not very hopeful about the pricing of shares and think that from what the bids are indicating, they can only be sold at the lower end of price bracket. Government wanted to raise Rs. 24,958 crore from disinvestment in the year 2009-2010. But, it has been able to raise only Rs. 13,591 crore so far. This money has been raised by disinvesting in Oil India Ltd, Rural Electrification Corporation and National Hydro Power Corporation.
Obviously, the target seems unattainable; considering the government still needs to raise Rs. 12,368 crore and even if the NDMC shares are sold at the highest end of price bracket i.e. Rs.350, the Government will still fall short of Rs. 738 crore.
Plus, a sale on the higher end of price bracket is highly unlikely and if the Government is forced to sell its stake on Rs. 300 per share, then only Rs 10,000 crore will be raised. In other words, government will miss its disinvestment target by Rs. 2367 crore. Here, it is necessary to remember that the OIL and NHPC got great response from the investors when their issues were offered to public. Some experts think that the aggressive pricing of NTPC’s share is the main reason for lack of interest by investors. Per share cost of NTPC issue was Rs. 201, even though the prevailing price of such shares in secondary market was around Rs 207.
NTPC shares were subscribed by just 1.2 times on the purchase orders from national institutions, such as LIC. Rural Electrification issue has also received a lukewarm response and its shares were subscribed by just three times.
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