ONGC share sale : Killing golden goose to achieve divestment target

Mumbai, March 01, 2012 : Oil major ONGC’s [stockquote]ONGC[/stockquote] share auction held by Government to mop-up approximately 12000 cr has run in to rough weather. It remains quite unclear that ONGC’s offer for sale has been subscribed fully or not, though Government maintains that ‘Issue is fully subscribed’. A total of 42.77 crore shares at a floor price of Rs 290 a share has been offered via auction route. State owned ONGC is the first company to raise funds via auction route.

The manner in which todays event unfolded and response of  top union ministers indicates that all is not well. No official confirmation of the actual response to the issue has been received. From stock exchanges to ONGC management or the Department of Disinvestment were absent for any comment or communication. When asked to Union petroleum minister Shri S. Jaipal Reddy regarding today’s development, he said that ‘His Ministry has no comment to make on the issue as it was handled by the Department of Disinvestment’.

It is to be noted that, this is the second attempt by government to go ahead with ONGC share sale. Due to increased input cost and high oil prices government is running a huge fiscal deficit and very ambitious target of 40,000 cr for the full year from divestment has put tremendous pressure to mobilise funds in order to keep government finance in check. Experts believe that the mode of share sale and more importantly pricing have acted as spoilsport as retail investor is completely missing from auction and floor price remained quite above the ruling market price.

Helping hand by LIC & FI

Sources whose official confirmation could not be obtained maintains that domestic institution such as LIC and SBI have pitched in heavily in the final phase of bidding actually just ten minutes before the close of auction. It is not very impressive for government that even Navratna such as ONGC’s share sale is also needs support by domestic institution. It could be indirectly termed as failure of government in general and Ministry of divestment in particular.

Conclusion
Today’s share sale by Government highlight the desperation by UPA to raise funds at any cost even though fundamental issues such as subsidy sharing and oil deregulation is still remains unresolved. There is clear disconnect between targeted projection and ways and means to achieve. Till the time such disconnect gets resolved – How many more golden goose will be slaughtered in the name of divestment ? remains unanswered.