PSU stocks dip below IPO prices

Remember the rush for high-profile PSU public offerings earlier this year? The same investors are now rueing over their losses in IBP, IPCL,...

Remember the rush for high-profile PSU public offerings earlier this year? The same investors are now rueing over their losses in IBP, IPCL, ONGC, CMC and Gail, as their scrips fell below issue prices in the recent market carnage.

The government had raised nearly Rs 15,000 crore by disinvesting in these public sector units (some of them like CMC and IPCL are already privatised) recently. It raised Rs 10,500 crore in ONGC alone.

Political uncertainty and worries over the economic policies of the new Congress-led government hit the market in past one month. These stocks were also affected in the bear hammering. BSE Sensex lost 843.24 points or 14.5 per cent between April 20, 2004 — the day the first phase of elections began — and May 21, 2004, a day ahead of the official formation of the new Congress-led government on May 22

Story continues below this ad

IBP which trades at Rs 459 has been among the biggest losers on the bourses. It is now quoted at a huge discount of 25.9 per cent to the offer price of Rs 620. ‘‘Gail, another major loser on the bourses, trades at Rs 169.55, a substantial discount to the offer price of Rs 195,’’ says a study by capital market.com. Gail shares were allotted to retail investors at 5 pe discount at Rs 185.25. ‘‘At Rs 706.55, ONGC trades at a discount to the offer price of Rs 750. ONGC shares were allotted to retail investors at Rs 712.50,’’ adds the study. Said BSE dealer Pawan Dharnidharka, ‘‘Oil PSUs like IBP, Gail and ONGC tumbled amid fears of increase in subsidy burden in the wake of surging global crude prices and amid worries that disinvestment may not be a priority with the new government at the Centre.’’

Prime Minister Manmohan Singh has already said that his government won’t privatise strategic oil PSUs such as ONGC and Gail. IPCL, in which the NDA government had launched IPO for the purpose of sale of its residual stake, trades at a substantial discount to the public issue price. IPCL trades at Rs 147.55 — a 13 per cent discount to the IPO price of Rs 170. Retail investors were allotted IPCL shares for Rs 161.50.

CMC, another PSU wherein the NDA govt came out with IPO to sale its residual stake, trades at Rs 451.20 compared to the offer price of Rs 475. CMC shares were allotted to retail investors at 5 per cent discount at Rs 451.25. ICICI Bank — the last mega IPO before the election has also slipped below offer price. At current Rs 267.25, the stock trades at a 4.5 per cent discount to the public issue price of Rs 280.

‘‘The government and merchant bankers then sold the stakes saying it was a good opportunity for investors to benefit from the disinvestment. Now it seems the government has benefited while investors are counting their losses,’’ says Pradeep Bhavnani, an NSE dealer. Shares of private and public sector banks were among the hardest hit in the market carnage. However, Bank of Maharashtra continues to trades at a premium to the IPO price. At Rs 33.45, the BoM stock trades at 45 per cent premium to the IPO price of Rs 23. The stock recovered from lower levels after a sharp fall.