Mumbai, Nov. 22: The government has decided to play safe with its selloff programme.
It has fixed a floor price of Rs 155 per share for the Hindustan Copper flotation, which works out to an almost 42 per cent discount to its current market price. On Thursday, the stock had surged 11.33 per cent to close at Rs 266.30 on the Bombay Stock Exchange.
Clearly, the government wants to bait retail investors with an attractive discount that leaves potential gains on the table.
The Centre is offloading 37,008,720 shares of the company aggregating to around 4 per cent of its paid-up capital. At this floor price, the Centre will mobilise over Rs 573 crore from the first tranche. The government has the additional option to sell 51,714,580 shares of the company, both aggregating to 9.59 per cent of the company's equity. These share sales will collectively yield over Rs 1,370 crore.
The government holds a 99.59 per cent stake in the copper producer, and the stake sale will bring this down to 90 per cent, thereby complying with the Securities and Exchange Board of India (Sebi) norms on minimum public shareholding. The market regulator has stipulated that by June, listed private sector entities must have a minimum public holding of 25 per cent and PSU companies 10 per cent.
Hindustan Copper is the first share sale under the divestment programme this fiscal. Market circles have been abuzz after hearing about the discount issue.
The mavens believe that the government has learnt its lesson after the big fiasco that enveloped the divestment in Oil and Natural Gas Corporation (ONGC) earlier this year.
It may be recalled that the floor price in the "offer for sale" in ONGC was set higher than the market price. Bids dried up as a result, and the Life Insurance Corporation (LIC) had to come to the government's rescue and save the issue. The institution bought nearly 38 crore of the 42.7 crore shares that were on offer.
"If the government does not want only PSU institutions such as the LIC to pick up shares in such sales, then it must offer an attractive price. After seeing the floor price announced for Hindustan Copper, it is clear that the government has now become more realistic and set an attractive price for investors. The pressure will now be on the merchant bankers to the issue," said Kris director Arun Kejriwal.
The share sale will be done through the offer for sale route where shares are auctioned during normal market hours. After Sebi opened this new window to enable promoters to pare their shareholding to comply with the regulations, 13 firms have opted for it.