Price fears cause ONGC share sales to slightly miss target

Published:  5 Mar at 6 PM

As reported by the BBC, the Indian government's efforts to sell a 5 per cent share in the Oil and Natural Gas Corporation slightly missed the set target amid fears that stakes were over-priced. It put up for sale 428 million shares at 290 rupees each, expecting to raise 124 billion rupees ($2.5bn; £1.6bn). However, it received offers for only 98 per cent of the shares.

Analysts cautioned that the government would have to reassess how and when it markets its shares in major firms in the future. Juergen Maiar, who is a fund manager at Raiffeisen Euroasien Aktien, said it would be a major disappointment for the Indian government that the offer was not fully covered, adding that this would lead to some rethinking about the privatisation drive. This will be a big lesson, said Mr Aktien, warning that the Government should not price the shares at a premium.

ONGC is India's biggest oil producer and is currently increasing its operations, already having expanded its fields by 15 in the current financial year. Its commerce is expected to swell further as oil demands in India continue to soar as the economy gets bigger. These factors had raised the Government’s expectations that the stakes sale would produce a great deal of investor interest.
Although the firm was seen as an attractive investment, the share pricing had turned off many potential buyers. The 290-rupee offer price was 2.3% more than ONGC's ending price on 28 February.