Mar 01, 2012, 06.46 PM | Source:

Why ONGC stake sale flopped? Find out

The much awaited Oil and Natural Gas Corpís (ONGC) share sale did not live upto the expectation of the government as total bids stood at 29.22 crore against 42.77 crore shares which were up for sale via the auction route.

Moneycontrol Bureau

The much-awaited Oil and Natural Gas Corpís ( ONGC ) share sale did not live up to the government's expectations. Total bids stood at 29.22 crore against 42.77 crore shares which were up for sale via the auction route.

ONGC's share sale was closely watched, as it was the first company to undertake the institutional placement programme (IPP), after market regualtor SEBI introduced it in early January.

Analysts with whom and CNBC-TV18 spoke to, cited-- pricing of the issue and policy overhang as major reasons for the programme to flop.

Ambareesh Baliga from Way2Wealth believes the stake sale was under-subscribed due to the price band of Rs 290/share which was at a 6% premium to its current market value. "The stock will react negatively in tomorrow's trade. ONGC stock might drop below Rs 270 levels," expects Baliga.

Nirmal Jain of IIFL blames government policies for the failure of ONGC divestment programme. Referring to the 38% subsidy burden which the company now bears against the earlier 33% on behalf of oil marketing companies who sell petroleum products at government stipulated prices, he says, ďWhy will an investor want to invest in a company where there is a policy overhang? Ē he questions. 

 Manish  Innani, director, Prayas Securities believes the ONGC stake sale was a no-show because mutual funds and insurance companies for whom a 25% reservation was made, had backed out although there is no confirmation on the same. He further says that the government was to mop up Rs 12,000 crore from this event, but now it could be around Rs 8,700 crore.

Must Read: Ahead of stake sale today, ONGC stock rises

ONGC stock price

On November 27, 2015, Oil and Natural Gas Corporation closed at Rs 235.25, up Rs 0.05, or 0.02 percent. The 52-week high of the share was Rs 389.25 and the 52-week low was Rs 208.00.

The company's trailing 12-month (TTM) EPS was at Rs 20.81 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 11.3. The latest book value of the company is Rs 169.02 per share. At current value, the price-to-book value of the company is 1.39.

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