The department of disinvestment (DoD) is taking a close look at the auction process of Oil and Natural Gas Corporation (ONGC) shares on Thursday, which saw the rejection of about 30 per cent of bids.
According to finance ministry data, bids worth Rs 16,460 crore were put and only Rs 12,766 crore accepted. Bids worth Rs 3,693 crore, or a little over a fifth of the total amount, were rejected. In terms of number of bids, almost a third – 1,219 of 3,982 – were rejected. The valid bids numbered 2,763.
“We are looking at the reasons for rejection due to problems in the system and also the timing given for placing the orders. May be changes can be incorporated in future auctions, so that orders don’t pile up towards the end of the allocated time,” said a senior DoD official. He said fixing the problems that led to the rejection of bids was key to avoiding similar confusion in future.
In the auction of 427 million shares, about 420.3 million were sold at an average price of Rs 303.67 per share, against the floor price of Rs 290 per share.
|Details||No. of bids||No. of shares||Bid amount
|*By members or due to insufficient funds Source: Finance ministry|
The last-minute glitches had also resulted in rejection of orders placed by Life Insurance Corporation (LIC), creating a lot of confusion. Finally, the bids were accepted.
Such glitches were unexpected, said market experts. “While there may have been slip-ups in the auction process, let’s not blame the system. If domestic financial institutions had to bail out the ONGC auction, they could have done it at 9.55 am. Why should LIC’s application come in and be handled by a greenhorn?” questioned Vinod Sharma, head of business, private broking and wealth management at HDFC Securities.
The government announcement of the auction spoke of a new-found confidence, he said. From a back-footed approach of a discounted follow-up offer to going on the front foot with a premium offering to the market price was a big change in approach. “But, in the end, it appeared someone had not done his homework,” said Sharma. Yet, there should not have been a lack of preparedness. The exchanges had held a four-hour mock trading session on February 29.
After closure of the auction, the Bombay Stock Exchange said, the offer for sale was completed using the secondary market mechanism created by it and the National Stock Exchange.
It said buy orders at both the exchanges reflected a demand of 292.2 million shares around the market close but certain orders not immediately confirmed or were erroneously rejected by custodians due to a mismatch at the latter’s end, though the orders were funded.
These orders were not reflected in the demand for 292.2 million shares mentioned earlier. After rectification of these errors, the final demand was for 420.4 million shares.
Monies and orders received after the usual market close have not been considered by the exchanges in the offer for sale, the BSE had said on Thursday.