SAIL OFS sails through; but FY14 divestment aim looks tough

The last divestment of current fiscal, the offer for sale of Steel Authority of India concluded today getting the government a little over Rs 1500 crores. The issue however was just about subscribed with Life Insurance Corporation and State Bank of India coming to the governments' aid at the last minute.

Looking at the fate of some recent OFS such as of SAIL and NALCO, it is clear that government may find it difficult to achieve its FY14 divestment target of Rs 40,000 crore, reports Aakansha Sethi of CNBC-TV18.
SAIL's OFS issue was subscribed about 97 percent till 4:25 pm today and suddenly at 5 pm 100 percent of the issue got subscribed. Sources said that about 35-40 percent of this was subscribed by LIC and about 10-15 percent by SBI. Also Read: SAIL OFS forced fed, ill-timed: Udayan OFS likely in 2013-14:
Shares of state-owned Metals and Minerals Trading Corporation of India (MMTC) have been under pressure ahead of likely offer for sale issue in April. The share was locked in 5 percent lower circuit today. The stock has tanked 28 percent in eight consecutive sessions and nearly 60 percent in past one month. Despite the valuation problem, the government has to meet the mandatory 10 percent listing norms and hence it is most likely to go ahead with it.
Similarly, in case of Coal India, post government's announcement of stake sale in next fiscal the stock started getting hammered. The government’s strategy to sell shares of its companies at lower prices to reach its disinvestment target in the current year has caused sharp declines in the stock prices of state-owned companies. Investors know that government is desperate and hence the stock prices are getting hammered. Govt needs to look at other options
Clearly, the government now needs to consider alternatives to offer for sale method. Either an institutional placement process or selling of stake in about 1-2 percent slots as they had considered earlier can be treated as some other options.
Also there have been legal complications with reference to selling the stake of Hindustan Zinc. So, it remains to be seen how the government meets its Rs 40000 crore target next fiscal. It seems that Specified Undertaking of the Unit Trust of India (SUUTI) remains as only option with the government in that case.