NMDC issue will be govt's acid test: Udayan

Udayan Mukherjee, Managing Editor of CNBC-TV18 believes the upcoming NMDC issue will prove to be the government's acid test going forward. "The government may easily say that I made a mistake with NTPC and NHPC. I will treat NMDC like a real IPO and give a good discount to people in the market."

 

Below is a verbatim transcript of his comments on CNBC-TV18. Also watch the accompanying video.

 

There was a difficult market condition and certainly it played a role in the tepid response that NTPC saw no denying at all. However, only 4% of the qualified institutional buyer (QIB) book was foreign institutional investors (FII) that's a startling statistics. 1.8 crore shares is all.

 

This is FIIs bid in a QIB book of 44-45 crore shares. I haven't seen this kind of a tepid FII move. In any of the large issues save none in the last 1-1.5 years, this is quite startling. Now if you look at it carefully, 90% of the QIB book and 40 crore shares out of 44 crore shares was the domestic institutional investors not including mutual funds. So it's basically the insurance companies, the banks which build out NTPC. These are government owned institutions.

 

Essentially what the government did is to say, I need to bridge my fiscal deficit. Hence, I am going to take money out of some of my own intuitions like SBI , LIC and try and bridge that fiscal deficit and that makes no sense to me. If that is the way you want to do it that I will lean on my own institution to bridge by fiscal deficit then that's one thing but it doesn't sound like a great road forward. Also you want to ask yourself why a follow-on public offer.

 

The notion of a public offer is that you will do something to get public participation otherwise why could have NTPC done a qualified institutional placement (QIP) or a placement. You want to do it to three institutions or ten, do a QIP and finish it off. Why do you have to do a FPO?

 

You would have got the same subscription for SBI and LIC in a QIP. Why make such a noise about doing a public offer. I think that question begs asking. Now that they have botched up two of the large offerings which is NHPC and NTPC with the only saving grace being Oil India in the middle. The big acid test will come from unless they want to hide under this thing. It was market conditions, we did all the things right from our front, which would be delusional but they might do it because they have done things like that in the past.

 

That acid test is NMDC. REC will pretty much follow the NTPC road. They will give a small discount to market price, it will not attract too much by way of interest. NMDC is virtually an initial public offering (IPO), it's not like NTPC, which is an FPO because the public float. You take out the insurance companies is just 1 crore shares in NMDC and its got a market cap of 1.8 lakh crore. The government may easily say that I made a mistake with NTPC and NHPC.

 

I will treat NMDC like a real IPO and give a good discount to people in the market because there is not too much price distortion I might cross because the holding is only 1 crore shares. That is the acid test where they can remedy some of the damage that they have done with the earlier two big issues.