ONGC pricing controversy: Who decided the floor price?

The blame game continues on the ONGC auction fiasco. In a startling revelation, government sources say the EGoM went against the department of divestmentís (DoD) advice as far as the floor price of the auction is concerned, reports CNBC-TV18ís Aakanksha Sethi.
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Mar 02, 2012, 10.53 PM | Source: CNBC-TV18

ONGC pricing controversy: Who decided the floor price?

The blame game continues on the ONGC auction fiasco. In a startling revelation, government sources say the EGoM went against the department of divestmentís (DoD) advice as far as the floor price of the auction is concerned, reports CNBC-TV18ís Aakanksha Sethi.

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ONGC pricing controversy: Who decided the floor price?

The blame game continues on the ONGC auction fiasco. In a startling revelation, government sources say the EGoM went against the department of divestmentís (DoD) advice as far as the floor price of the auction is concerned, reports CNBC-TV18ís Aakanksha Sethi.

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Aakanksha Sethi, CNBC-TV18
The blame game continues on the ONGC auction fiasco. In a startling revelation, government sources say the EGoM went against the department of divestmentís (DoD) advice as far as the floor price of the auction is concerned, reports CNBC-TV18ís Aakanksha Sethi.

It is learnt from sources that, the DoD had suggested a price of Rs 260, but the EGoM took it higher to Rs 290 . In DoDís presentation made to the EGoM, it gave various facts and said that several Indian block trade deals that happened from 2009 to 2011 like HDFC, ICICI Bank, Cairn India, Reliance Industries were all on a discount.

Hence, a floor price of Rs 260 per share should be taken. This floor price implies a 7.49% discount to the last close and an 8.53% discount to the two week average price. They said this discount would give an incentive to investors. Despite this, the EGoM decided to go with a floor price of Rs 290. This has been criticized by several analysts, who believe that this is one of the reasons for ONGC debacle.

However, it remains to be understood why the EGoM went ahead with the premium despite DoDís advice of a discount.

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