Govt seeks review of Sebi PSU pricing norms

NEW DELHI: The disinvestment ministry has sought a review of Sebi new norms on pricing of public offers under the strategic sale route for PSUs.
The new clause under the takeover code for PSU strategic sales stipulates that open offers by strategic investors in disinvested PSUs should be made taking into account average daily high and low closing prices in the fortnight preceding the opening of the financial bids.
This now means that if the price under this two-week period is higher than the average of last six months then the public offer will be made at the fortnightly average.
Bidders for PSUs are upset about the new clause, which they fear will expose all these stocks to manipulation in the said two-week period. Also, they feel that it is impossible to factor in a possible spike in prices at the last stage into financial bids.
On an average, bidding through the strategic sale route has been priced at 20-25% to prevailing market price.
Moreover, say investment bankers, this will also substantially increase acquisition cost as the public offer will have to made at a much higher price just because of a huge spike by speculators over the two-week period. Disinvestment ministry sources confirmed that they had written to Sebi last week, and are awaiting a reply.
Past records show that scrips of PSUs on the disinvestment block have witnessed sharp increases, as privatisation process gathers momentum. Bankers also point out that while rigging or manipulating a stock for a six-month period is a tall order, it is much more achievable in a two-week span.
Sebi''s recent googly on open offers by strategic acquirers of PSUs has thrown potential bidders into a flap, and many are now worried over their much higher acquisition cost.
Modifying its takeover code through a notification on September 14, Sebi had said that in addition to its existing stipulation that average of daily high and low for six months preceding the takeover of entity, the acquirer of a PSU under the government''s privatisation programme should consider scrip prices for the fortnight preceding the opening of financial bids.
Until now, Sebi''s takeover stipulated that the open offer would have to be made at either the strategic bid price or at the price arrived at taking six months average, whichever is higher.
With the new criterion being introduced to determine the open offer price, cost of acquisition is bound to increase as scrip prices normally see a big increase as the date of financial bid draw closer.