Government Gets Rs 260 Crore Via HCL OFS; Scrip Down 3%

In accordance with the minimum public shareholding norm, the government today off loaded its 4.01% holding in Hindustan Copper (HCL) through an Offer for Sale (OFS). In this process, the government has garnered around Rs 260 core by selling 3.71 crore shares. The floor price for the OFS has been fixed at Rs 70 per share. The issue was oversubscribed by 1.18 times and a demand for 4.38 crore shares has been received at the BSE and NSE against the 3.71crore shares offered.

This is the second tranche of government holding in the company after the Cabinet Committee on Economic Affairs (CCEA) had approved disinvestment of 9.59% of government holding in September 2012. The government sold 5.58% of its holding in November 2012 at a price of Rs 156 per share fetching more than Rs 800 crore. Considering this, yesterday’s price was quite low and the floor price of Rs 70 has been decided by the panel headed by Finance Minister P Chidambaram. 

The current OFS of HCL will again spurt up the debate regarding the valuations of the stock and the price discovery mechanism to be implemented in the OFS. The government had earlier sold its 9.33% stake in MMTC in June 2013 via an OFS at a floor price of Rs 60 per share while the scrip was trading at Rs 211. Although the government had collected Rs 568 crore through the MMTC disinvestment, its scrip took a huge beating and persistently broke a lower circuit to touch Rs 88 on July 3, 2013, losing more than 58% in just 20 days. Similarly, the HCL scrip too got a beating at the bourses on Wednesday (July 3, 2013) as it shed 3.09% on the BSE and touched Rs 70.81.

On the disinvestment front, the government is all set to take off its bigger disinvestment drive with the success of its HCL issue. These would comprise NFL, Neyveli Lignite, STC and ITDC, which are in the pipeline. These companies have to comply with the minimum shareholding listing norm of the SEBI. 

“We have already made every arrangement on our part and these issues will hit the markets in July 2013 itself with NFL and Neyveli lignite to be the first ones to come out”, informed an official of the Department of Disinvestment. The government has set a target of Rs 40000 crore via disinvestment for FY14 and it has reached Rs 828 crore through these 2 issues so far. 

The first big ticket disinvestment would be the OFS of Indian Oil wherein the government holds 78.92% and its wants to off load 4%. The government also faces a problem regarding disinvestment in the loss-making companies like HMT, Scooters India, ITI etc. “We are still figuring out as to what can be done in case of these companies as we may not get any takers for these companies”, the DOD official added. The government is also seeking an exemption from the SEBI for these companies with respect to the minimum shareholding norm. The PSUs are to comply by this norm by August 8, 2013.