Well, the government plan of disinvesting state owned companies to raise capital may not be working as they would have wanted.
We already saw what became of the NTPC IPO which failed to deliver the goods and failed to close at a decent profit on the first day of its listing.
Now, even the NMDC FPO has failed to raise any interest from the investors.It barely managed to get subscribed 1.25 times which again was not driven by the usual participants- FII’s and retail investors.
Evidently, government backed institutions SBI and LIC came to the aid of NMDC and bailed out the FPO offering, as reported in Financial Express
State Bank of India and Life Insurance Corporation have reportedly put in close to Rs 8,200 crore, or around nearly 80% of the issue amount, of Rs 9,800 crore, at the lower end of the price band. The subscriptions by the insurer and India’s biggest bank, reportedly at Rs 7,500 crore and Rs 700 crore respectively, ensured that the issue was finally subscribed 1.25 times.
FII Contribution in the NMDC FPO –A mere 2.5%
Retail Investors only managed to subscribe to 20% of the quota set aside for them
Does SBI and LIC bailing out help the government’s objective?
If i am not wrong, wasn’it about raising money.But, with SBI and LIC doing the bulk of purchasing in the NMDC FPO, what does that mean.
Taking money from one pocket and putting it in another
Well, the FPO was priced a bit too steeply to excite the investors and the government might have gotten a little too overconfident with the recent success of IPO’s in the Indian Stock Market.
What do you think? Will the government manage to achieve its target of raising the required capital from the disinvestment of state owned firms.