An IPL without Rochelle Rao

A few weeks ago, Street Food had pointed out how the disinvestment programme that is being executed through the offer for sale (OFS) route is hurting the market in more ways than one.

Thankfully, in the first announcement from the department of disinvestment in the new financial year, a request for proposal has been floated to appoint bankers for a follow-on public offering (FPO) in Engineers India. Though the decision seems to have been dictated by the rules that do not allow a company outside the Top 100 by market capitalisation to use the OFS route, it is good for the Street.

Initial public offerings (IPOs) and FPOs come with a lot of regulatory requirements, such as publishing offer documents and a specific timeline. Over the years, these requirements have been utilised by smart issuers and sellers to market the issues with potential investors. An entire ecosystem of brokers, printers, public relations professionals/ firms and analysts evolved around this. Enter OFS and the entire sale process became mechanical. It was like watching IPL without Jumping Japak and Rochelle Rao.

Spare a thought for journalists like me who live out of our precis writing skills. No offer document means no risk factors. No risk factors mean no difficult questions asked to the management and, therefore, no story.

No offer document also means the company can get away without making several disclosures, which it would otherwise have to make. These disclosures could have an impact on the price, which in turn could influence the investment decision. A recent report by Mint highlighted how the bidders in the OFS of Rashtriya Chemicals and Fertilisers felt duped by the non-disclosure of price sensitive information by the company. Read here: http://bit.ly/ZHc6LR

The space between clearance of the IPO and its launch was used for roadshows in different cities across the country. The announcement of the price band was often turned into a bonanza for the press. The top brass of the company and in case of government divestments, half of Delhi used to be lined up in Mumbai.

Apart from the department of disinvestment officials, even the line ministry's officials wanted to be heard. For big issues such as Coal India, the press conference stage looked like the legislative assembly of one of the smaller states, flooded with bankers, secretaries and even ministers competing to hog the limelight.

Similar shows were put up separately for analysts who went deep into numbers even as they digged into the desserts.

Though the government tried to create some buzz around the announcement of the floor price in the OFS, the wider interest was conspicuously absent. There was not much to talk about or write about. And, without the hype, it is almost impossible to bring in the retail investors. Needless to say, though the OFS was open to the smaller investors, not many participated. On several occasions, even the institutions couldn't care less, making the whole event an incestuous transaction between the government and its offsprings.

Therefore, it is good for everyone on the Street that a government FPO is coming. May it, like we have been hoping for several years now, put some grease on the rusting primary market machinery, if not restore it to past glory. To borrow from Farah Khan, "Sirf bechne ka nahi."