Poor retail show in FPOs not to alter selloff plan: Montek

The continuing tepid response from retail investors to the recent follow-on public offerings (FPOs) of CPSUs will not discourage the government from going ahead with the divestment roadmap, the Planning Commission said here today.

"You have a steady programme of divestment. Markets will go up and markets will go down. Some will receive a good retail response, some will not. I think you should have a steady policy," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

While response from the retail segment has been tepid to these issues, that from institutional investors has been healthy, Ahluwalia pointed out.

Presenting the Budget, Finance Minister Pranab Mukherjee had increased the revenue target from divestment to Rs 40,000 crore in 2010-11 from the targeted Rs 25,000 crore for the current fiscal.

The recent FPOs from power PSUs like NTPC and REC and the largest miner NMDC received a relatively poor response in general and from retail investors in particular, prompting the state-run entities like LIC and SBI to step in to bail out these issues.

In case of the REC issue last month, the portion reserved for QIBs was subscribed 4.15 times while demand from HNIs and retail investors remained tepid at 74 per cent and 12 per cent, respectively.

Similarly, the NTPC issue last month also almost drew a blank from retail investors, which analysts attributed to the high pricing of the issue. NTPC had fixed the base price for its offer at Rs 201 a share.

Last month, revenue secretary Sunil Mitra had said pricing of the recent NTPC issue was not the reason for a weak retail participation."We think the NTPC pricing was good; don't think the pricing was high," he said.

Meanwhile, when asked whether the huge government borrowing scheduled for the next fiscal (around Rs 4,57,000 crore), would hit the private sector, Ahluwalia said there was no need to worry about it. "There is no need for too much worry about government borrowings next fiscal," he said.