NMDC gets poor response; Ex-Disinvestment Secy defends govt

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NMDC gets poor response; Ex-Disinvestment Secy defends govt

The follow-on public offer of NMDC, a navratna public sector undertaking, was fully subscribed on the last day. Qualified institutional investors helped the issue to sail through. But the response from FIIs and mutual funds was muted. Former Disinvestment Secretary Pradip Baijal, says the government has not gone wrong.

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Excerpts from India Business Hour on CNBC-TV18 Watch the full show » RELATED NEWS NMDC FPO fully subscribed, sources hint at LIC bailout NMDC a probable candidate for Nifty, MSCI, say bankers NMDC BSE | NSE 31/05/12 Are Mutual Funds betting on NMDC?

The follow-on public offer of NMDC , a navratna public sector undertaking, was fully subscribed on the last day. Qualified institutional investors helped the issue to sail through. Their reserved portion was subscribed over two times. Overall, the issue got overbid 1.24 times, as per data available on the NSE website.

LIC, India's largest insurance company, bailed out NMDC FPO on the last day, subscribed to 75-80% of the issue at Rs 300 per share, reports CNBC-TV18 quoting sources. It has put in nearly Rs 7,500-8,000 crore in FPO.

In addition some state owned banks also put in bids, but the response from FIIs and mutual funds was muted.

In an exclusive interview with CNBC-TV18, Former Disinvestment Secretary Pradip Baijal, says the government has not gone wrong. "The problem was that there was a very little supply of NMDC shares in the market which resulted in a very high price."

Here is a verbatim transcript of the exclusive interview with Pradip Baijal on CNBC-TV18. Also watch the accompanying video.

Q: Mr Baijal yet another lackluster issue, what seems to be the problem? NMDC is a good company, has strong fundamentals, the markets are strong yet this is the third disinvestment candidate that has seen a lukewarm response? Where has the government gone wrong?

A: The government has not gone wrong. The government had decided that there will be no privatization, but there would be disinvestment, so the prices would be low. The problem was that there was a very little supply of NMDC shares in the market which resulted in a very high price; Rs 450 was the price some time back, but that was due to the lack of supply of shares. Once you increase the supply of shares then what happens is that even those people who are holding the shares will sell that in the market depressing the price because they know they can buy it next week, so that happens all the time everywhere.