LIC Shelled Out Rs 12,000 Cr to Bail Out ONGC

New Delhi
LIC Shelled Out Rs 12,000 Cr to Bail Out ONGC
State-owned LIC saved the ONGC issue, first-ever stake sale of government equity through the auction route, by pumping in over Rs 12,000 crore and picking up 95 per cent of the total shares put on the block.

The auction process, which evoked criticism from market players, has helped the government in getting around Rs 14,000 crore from disinvestments this fiscal against the target of Rs 40,000 crore.

The government, however, expressed satisfaction over the auction process and said it would consider more stake sale through the same route after analysing the technical glitches that marred ONGC stake sale.

Life Insurance Corporation (LIC), according to official sources, picked up 40 crore shares, or 95 per cent of the ONGC shares, sold through the auction route yesterday fetching the government a total of Rs 12,766.75 crore.

There was no participation from foreign institutional investors and very little from retail investors, sources said. About 42 crore ONGC shares, representing a little less than 5 per cent of government stake in the oil major, were sold at an average price of Rs 303.67 a piece.

Although the finance ministry has asked capital market regulator Sebi to look into the glitches, BSE and NSE said that the system operated normally.

During the ONGC auction, the bids could not be uploaded because of technical reasons and thereby creating confusion about the outcome of the stake sale process till late evening.

The issue was finally resolved after Sebi's intervention and the Finance Ministry said that the issue was subscribed 98.3 per cent.

Finance Minister Pranab Mukherjee said the government will study the auction process before going ahead with stake sale of other companies.

"This (ONGC auction) is the first case. We shall have to to analyse and then make assessment," he said.

Questions were also raised on fixing of floor price of the ONGC issue at Rs 290 on Tuesday, which was at a 2.3 per cent higher than that day's closing price.

Market participants blamed the high floor price for the poor response from foreign institutional investors (FIIs).

Shares of the oil major today closed 2.22 per cent lower at Rs 281.45 on the on the BSE after recovering from day's low of Rs 287.85.

Talking to reporters Disinvestment Secretary Haleem Khan said, "in terms of volume, we received bids worth Rs 16,460.2 crore and out of that Rs 3,693.29 crore worth bids were rejected. Bids worth Rs 12,766.75 crore were accepted."

The Secretary further said his department was comfortable with the auction process and would consider selling government equity in more PSUs through the same method.

"I am perfectly comfortable with over 98 per cent subscription (to ONGC issue), and in terms of FPOs, which were scheduled (during 2011-12), we got much more than that," he said.

For the current fiscal the government had planned a host of follow on public offers (FPOs), but could not come out with them (except Power Finance Corp) due to volatile stock market conditions.
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