High floor price may have dashed FII interest in ONGC: experts

A high base or floor price may have played spoilsport in the government's ambitious ONGC stake sale which fell woefully short of the over Rs 12,400-crore target, market experts said today.

High-profile foreign investors apparently stayed away from the auction wherein there were bids for only two-third of the 427 million shares on offer.

"The government cannot bully FIIs," a top analyst said on the Rs 290 per share floor price that the government had set for bidding in the auction.

The floor price, which was set by a ministerial panel on Tuesday, was over 2% higher than the closing level of the previous day.

Another market commentator said there was no logic in setting such a high price and then disclosing it to bidders.

"At best they should have kept the floor price a secret like the government had done in case of disinvestment of its stake in PSUs previously. After bids pour in, the same ministerial panel could have decided on a cut-off," he said.

Sebi's guidelines for auction also give sellers an option to keep the floor price a secret till closing of the share sale.

At the end of the one-day auction, the auction got total bids for 292.2 million shares, including 199.2 million on the NSE and about 93 million on the BSE platform, exchange officials said. However, the final figures were yet to be updated on the websites of the two bourses.

The ONGC auction fell short of target and may fetch just Rs 8,500 crore against the target of Rs 12,000-13,000 crore, a shortfall of at least Rs 3,500 crore.

Market analysts believed the auction of ONGC got weak participation from institutional investors due to the over-pricing issue.

Wellindia Head Equity Research Vivek Negi said, "Dalal street was expecting a floor price of Rs 270 apiece and not Rs 290 as fixed by the Empowered Group of Ministers [EGoM]."

"ONGC's auction received poor response from FIIs as they considered the floor price as over-valued," CNI Research Head Kishor Ostwal said.

He said, "there is no clarity, whether ONGC's auction was fully subscribed or not."

Echoing a similar view, Jagannadham Thunuguntla of SMC Global Securities said, "We had expected a discount in the floor price but Rs 290 per share came as a surprise. It seems institutional investors gave a thumbs-down to the auction."

He added, "Another reason for the lower than expected bids were lack of clarity on the part of subsidy sharing plan."