LIC was willing to take whole ONGC issue: Haleem Khan, divestment secretary

Disinvestment secretary Haleem Khan says ONGC auction was a huge success. It is wrong to judge auctions by the same yardstick as follow-on offers, as the idea is not to get massive over subscription but a good price, he says. The government should not be apologetic about domestic institutions buying shares in government's disinvestment programme, he says. Excerpts from an interview with ET.


The ONGC auction has been labeled a big failure and embarrassment for the government. Do you agree with the view?

Let me say upfront that the ONGC auction cannot be termed a "failure". One needs to view the process of 'prospectus-based FPO' and 'auction' differently. In a prospectus-based FPO there may be some justification to measure the success of an issue by the number of times it got oversubscribed.

In an auction the target is maximising the sale proceeds. ONGC auction was aimed at or above the floor price of 290. Nobody, rationally speaking can find a realized price of 303 plus a failure.

I am sure not many people have internalized the guidelines fully. While in case of a prospectus-based FPO a company can bring the next offer only after one year of the previous one while 'Auction' can take place with a gap of 12 weeks only. So, less than 100 % sale in one go may be presumed to have been visualised as happening more often than not.

Still if one wants to measure it by this criterion, too, it should be termed as grand success rather than failure. The quantity sold was more than 98%. It also must be noted that against an offered quantity of 42.8 crore shares, bids were received for 54 crore shares.

Thus even from the bid quantity point of view it cannot be considered a failure. It would have been called a rare feat but for the rejection of bids for 12 crore shares amounting to 3693.27 crores. This being a first case under the new guidelines one should not take the rejection so harshly that the auction process itself be condemned as failure.

Do you think aggressive marketing could have saved the day?

I can only say that this observation also emanates from the prospectus-based FPO mindset. The auction guidelines stipulate that soliciting and marketing is not on, therefore, it would be rather harsh to blame merchant bankers. With regard to participation of FIIs, there is a need to look at another set of data.

Foreign institutional investors pumped in 83,429 crore in December, January and February. In February alone they had invested 25,212 crore in equity - the highest since January 2010 and another 10,016 crore in debt. What extra FII inflow was considered so desirable that ONGC auction is being dubbed as failure?

Was there an issue with the way the auction process is structured?

It is a new instrument. We dared to give it the first trial. It would not be fair to point fingers at its structure so soon without understanding the outcomes fully and dispassionately. Any change takes away the comfort of the status quo at least from some stakeholders. Nobody, however, can question its efficacy with regard to saving of time and cost.

But the issue sailed through only because of LIC that too at the last minute

The logic behind this observation I have not been able to comprehend. Are we saying LIC was not interested in buying ONGC? Or we are feeling bad that LIC bid so aggressively that FII could not outbid it? Do we mean LIC putting bids earlier in the day would have been optically more desirable?

Are we saying that if FIIs are not able to invest in ONGC in a big way, the local institutional purchase becomes a non-professional decision? Let me share with you that since the day EGoM decided to sale 5% stake in ONGC both official and unofficial circles confided with me that LIC is willing to take the whole quantity and at a very good price. In fact the price then talked about was much more aggressive.

Do you think the aggressive pricing of the issue could have dampened investor interest?

In an auction what purpose will it serve to have lower floor price? Do we need more footfalls? Against 42 crore plus shares on offer, bids were received for more than 54 crore shares. Again, against the floor price of 290 more than 98% quantity got sold for more than 303.

But for the large rejection the remaining quantity also would have gone for a price much above 290. If these numbers mean, "dampened investor interest" then my response would be it is your conclusion and let it be good for you.

What exactly went wrong with the ONGC auction? If you were to do it again, what is it that you will do differently?

Having more than one platform for auction did not serve much purpose. One (BSE or NSE) would have sufficed. Coordination issues would have been less; data management would have been smoother. One may even tend to arrive at the conclusion that the whole trading day is too much of time for auction process.

The investors like to keep their bids close to the chest as long as they can. The slow progress of bid tends to confuse the media. Media starts wondering whether all hype about the appetite for the scrip prior to the auction day was only a build up.

If the government institutions subscribe to stake sale by the government, it will be always assumed that it was done under duress...

I don't think this tendency to project our institutions as lesser professionals and processes as less than objective is going to go away soon. I don't think government needs be overwhelmed by criticism to such an extent that all new initiatives and efforts to do things efficiently need be put on the backburner.