The government on Thursday raised Rs 1,165 crore from an ‘offer for sale’ of five per cent stake in Concor, also known as Container Corporation of India. An ‘offer for sale’ is an auction of shares where the proceeds go to the promoter, which in Concor’s case is the government.
The stake sale saw strong demand from small investors. Demand in the retail portion (where small investors can invest up to Rs 2 lakh each) was bought two times the shares on offer. On Wednesday, the share sale of the state-run company had seen similar demand from institutional investors (such as life insurance companies, mutual funds, and foreign investors). Overall, the issue got 19 million bids for the 9.7 million shares on offer. Interestingly, the demand from small investors was strong despite weakness in Concor shares, which were down 2.7 per cent on Thursday, to close at Rs 1,163. The government had fixed the floor price for the share sale at Rs 1,195 apiece. (The floor price is the price at and above which investors can place their orders). Small investors were offered a five per cent discount on the allotment price, which is the price at which most bids are made. Shares in the ‘offer for sale’ will be allocated on a price priority basis, meaning if A puts in a bid higher than that of B, A will be given the first preference during allotment. Now, if the allotment price is assumed to be the floor price, the final price for small investors works out to Rs 1,135 per share, which is 2.4 per cent lower than Thursday’s share closing price.
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Kotak, ICICI Securities, and Citigroup Global Markets managed the share sale. Investment bankers say despite the market volatility, appetite continues to remain strong for share sales, boosting prospectus for further divestments by the government in the remaining three weeks of the financial year.
The Centre has now raised Rs 19,300 crore as part of its 2015-16 divestment programme.
“The government has appointed banks for further disinvestments. It has to decide with which it wants to go ahead with this financial year,” said an investment banker.
Last month, the government had sold shares worth Rs 5,000 crore in power utility NTPC. This financial year’s biggest divestment was in Indian Oil Corporation, which helped the government get Rs 9,369 crore. Both share sales managed to sail through due to state-owned LIC (Life Insurance Corporation of India).
Power Finance Corp, Rural Electrification Corp, and Engineers India are among others where the government sold its stake this financial year.