SAIL share offer subscribed more than two-times

MUMBAI: A clutch of state-owned insurers and banks stepped in to ensure the success of the Narendra Modi government’s first share sale. Public sector insurance companies led by Life Insurance Corp. (LIC) and lenders including State Bank of India (SBI) lapped up majority of the Rs 1,700-crore issue of Steel Authority of India ( SAIL) on Friday as many traditional foreign institutions and domestic mutual funds stayed away from the offer. Retail investors lapped up all the shares set aside for them.

SAIL’s 20.65-crore-share offer for sale (OFS) done through stock exchanges on Friday was subscribed two times. Bids under the general category, including institutional investors and banks among others, were almost two times the 18.65 crore shares reserved for them.

Retail investors put in bids for 2.7 times the 2.06 crore shares kept aside for the category. They will be allotted the shares at a discount of 5% to the bid price. There was some confusion about the subscription details in the last hour of trading. At around 2:30 pm, the BSE website showed the offer was subscribed 131%, but it was soon revised to 69%. Soon, both exchanges showed the offer was fully subscribed.

State-owned insurance companies such as LIC and General Insurance Corp.(GIC) among others pumped close to Rs 700-750 crore into the share sale, said a banker in the know. Some public sector banks, along with one large private bank, invested about Rs 450-500 crore in the issue.

Private banks put in Rs 100 crore

The private sector lender put in close to Rs 100 crore, the banker said.

In addition to these state-owned firms, at least 12 foreign hedge funds such as Segantii Capital Management and Geosphere subscribed to the SAIL OFS, said a source. But, investment by some of these asset managers in the SAIL issue was part of a trading strategy involving shares and futures contracts.

Various hedge funds sold futures contracts of SAIL before the announcement of share sale. In the OFS on Friday, they subscribed to shares proportionately. These funds benefit when the price of the futures contract and the share price converge.



Unlike traditional foreign institutional investors (FIIs), who buy and hold for a while, these hedge funds are said to have invested in the issue with the intention of holding for a shorter period. Bankers said many long-established institutional investors were not keen to put money into the SAIL issue because of steep valuations.“Operationally, SAIL is not the best opportunity that investors have as of now. Also, there was very little left on the table in terms of valuations,” said a senior fund manager of a top mutual fund.