While the government has kickstarted its divestment plans for 2012-13 with Hindustan Copper, it seems that the whole programme will be once again salvaged by state-owned entities, a trend that was visible last year too.
According to sources familiar with the matter, the offer for sale (OFS) of Hindustan Copper would have been a failure if government-owned banks, along with Life Insurance Corporation (LIC), would have not come to the rescue. Sources say that more than 60% of the bids came from public sector entities.
While the exact quantum of bids could not be ascertained, sources say that LIC was the largest bidder at more than R350 crore. The country's largest lender, State Bank of India, is believed to have placed a bid of more than R100 crore.
Further, other state-owned banks like Central Bank of India, Union Bank of India and Punjab National Bank, among others, are believed to have put in bids in the range of R40-50 crore each. Bankers also affirmed improvement in participation from retail investors and high net-worth individuals (HNIs), who are believed to have put in bids totalling R80-100 crore.
“Apart from government-owned entities, the offer received good response from retail and HNI clients. However, the issue did not see any participation from foreign institutional investors (FIIs) as the stock was already trading at very high valuations,” said an investment banker on conditions of anonymity.
Even after two straight sessions of hitting lower circuit, shares of Hindustan Copper are currently trading at 48.76 times its trailing earnings per share (EPS) of R3.496, Bloomberg data show.
Last week, the government mopped up approximately R808 crore by diluting 5.58% of its stake in Hindustan Copper, marking the start of its divestment programme for the financial year 2012-13.
The government plans to collect R30,000 crore through disinvestments this year.
Data with the stock exchanges showed the offer for sale (OFS) attracted bids for 5.16 crore shares, or 58% of the issue size, at an average indicative price of R156.56 per share. The floor price was R155 per share and the minimum number of shares on offer 3.7 crore shares. The maximum shares on offer 8.87 crore shares or 9.59% of the total paid up equity.
Meanwhile, shares of Hindustan Copper lost 20% for the second consecutive session to close at R170.45.