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SAIL’s Rs 1,700-cr disinvestment successful

Steel Authority of India’s (SAIL) 5% stake divestment by the government—first issue of the 2014-15 disinvesment programme—received encouraging response from investors.

The Rs 1,700 crore-offer for sale (OFS) of the steel manufacturer was subscribed more than two times, while the portion reserved for retail investors—those investing up to Rs 2 lakh—got subscribed nearly three times.

Experts said that the success of the SAIL offering will be a confidence booster for the government, which has set a record Rs 58,425 crore gross disinvestment target for the current
financial year to bridge the fiscal deficit.

According to stock exchange data, the SAIL’s 206 million-share sale received total bids of nearly 420 million—twice the shares on offer. The 20.6 million or 10% quota meant for small investors got more than 53.3 million bids. SAIL is the first government disinvestment which had retail quota.

The indicative price, which is the volume weighted average price of all valid bids, was around Rs 83.9, more the floor price of Rs 83 set by the government.

Investment bankers handling the SAIL OFS said that the final price could be more than Rs 84 as the allotment was being done on a price priority basis. Under this method, allotment is done to those bidding high.

Bankers said retail investors were lured towards the SAIL offering thanks to the 5% discount on offer. Shares of SAIL ended 3% lower at Rs 82.8 on the BSE. In other words, the shares were available below the OFS price in the secondary market. The consensus 12-month price
target on the stock is Rs 78 according to analysts tracked by Bloomberg.

The centre will have to raise another Rs 57,000 crore before April to meet achieve its disinvestment target. The government will have to beat the odds as in almost every time the centre has fallen short of the target.

Market players said big-ticket share sales in Coal India and ONGC hold the key for the government. Coal India’s stake sale is likely to be worth more than Rs 20,000 crore, while ONGC’s will be around Rs 15,000 crore.

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