Shourie plays market regulator

Uday Chatterjee
03 March 2004

It was neither a broker nor a company but Disinvestment Minister Arun Shourie who sent shock waves through the stock markets last week. Stung by the luke warm market response to the public offering of the public sector unit (PSU) companies, Shourie lost his cool and lashed out against the broking and investment banking community.

Referring to the fall in share prices just before announcement of the floor prices of the PSU companies, Shourie said, "We have identified the people behind it. Some people worked in anticipation that the Government will give a 5-10 per cent discount from the last closing price when it announces the floor price." That sent brokers and investment bankers cowering and left the retail investor more confused than he was before.

The genesis of the problem perhaps began when the government decided to embark on its 'India Shining' campaign. A part of the action plan, calculated to keep India shining, was to sell the Government of India's residual stakes in IPCL, IBP, CMC, Dredging Corporation of India, GAIL and ONGC. The exercise was to be completed before March 31, irrespective of market conditions, liquidity and timing. The sales are slated to bring in about Rs 15,000 crore to the government's kitty and help reduce the fiscal deficit.

Beginning last Monday, sale offers for IPCL, IBP, CMC, GAIL and Dredging Corporation of India Ltd opened. The government also began road shows for ONGC, the offer for which opens on March 5. The first five companies were expected to fetch Rs 5,000 crore cumulatively, while ONGC, billed as the 'mother of all issues,' was to have brought in Rs 10,000 crore.

Apart from these PSU issues, several other issues of well known companies like Bank of Maharashtra, Petronet India, Power Trading Corporation and Biocon are due to hit the market at around the same time. Under such circumstances, how does the retail investor, with limited resources choose from the plethora of issues on offer? (See: )

A retail investor is defined by SEBI as one who invests up to Rs 50,000 in the market. Thus if the retail investor puts his money on IPCL, the first of the PSU issues to open, his money is stuck till he either receives an allotment or a refund. By that time, the other issues would have closed and the investor would have lost the chance to invest in these issues.