The government on Friday mopped up approximately Rs 808.03 crore by diluting 5.58% of its stake in Hindustan Copper, marking the start of its divestment programme for 2012-13. The government plans to collect Rs 30,000 crore through disinvestments this year.
The stake sale, merchant bankers said, was completed successfully due to large bids placed by Life Insurance Corporation (LIC) worth around Rs 350 crore — which is understood to have placed bids through 10 brokers — as also public sector banks. According to investment banking sources, public sector banks including Punjab National Bank and State Bank of India are believed to have bought into about 15% of the issue. Foreign institutional investors, by and large, stayed away, merchant bankers said, though mutual funds were subscribers to the tune of R100 crore. Brokers and bankers said there was a fair amount of interest from retail investors and high net worth individuals.
Data with the stock exchanges showed the offer for sale 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 was 3.7 crore shares. The maximum shares on offer was 8.87 crore shares or 9.59% of the total company’s paid-up equity. The Hindustan Copper stock closed at R213 on Friday.
“Due to the significant discount retail investors enquired about the sale even as we shared our negative view on the stock,” said a dealer of a domestic broking house.
“Investors should not risk an entry into companies run by public sector undertakings unless they are available extremely cheap,” said Ramdeo Agarwal, joint MD, Motilal Oswal Securities. At the issue price of R155, the trailing 12-month PE multiple for the stock works out to 44 while at the current market price its an expensive 61 times.
Of late, several PSUs including NALCO, NMDC, Oil India, NTPC and MMTC have been in the limelight as possible candidates for divestment. The government said on Friday the NMDC sale could be next. Analysts have identified NMDC as the only attractive bet given its status as the biggest domestic iron ore provider.
Meanwhile, the government’s plan to offload a 9.5% stake in state-run power producer NTPC has also received the Cabinet nod. The sale, which is estimated to raise about Rs 13,000 crore, is expected to take place in January. The NTPC share fell 2.6% or R4.20 to R159.20 on Friday. Even as NTPC enjoys a monopoly in its business segment, experts are not enthused about the offered sale given the limited opportunity it enjoys in the merchant power segment.