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PSU peers salvage NMDC public offer.

THE follow- on public offering ( FPO) of public sector minerals giant NMDC Ltd sailed through on Friday, thanks to significant assistance from its public sector peers. This will, however, see its pricing being set at around the lower- end of the price band of Rs 300- 350.

According to market sources, the bailout of the issue by Life Insurance Corporation of India ( LIC) and State Bank of India ( SBI) was huge and unparalleled in the history of the primary

market -- the two picked up 70- 80 per cent of the shares on offer. That means the interest of other investors -- high networth individuals ( HNI) or retail -- in the issue was negligible. However, there were rumours that steel majors like Tata Steel and ArcelorMittal had also bid for the company's shares.

According to the latest data available from stock exchanges, the issue received bids for 1.24 times the issue size, that is, about 41.26 crore shares. The total issue size was over 33.22 crore shares.

" This shows that the level of maturity of the market is rising.

Investors are not falling prey to the government's contentions ( of high pricing of its issues).

Investors have proved that all PSU issues cannot be treated like that of REC recently," said

Jagannadham Thunuguntla, equity head of SMC Capitals.

" Despite offering the issue at a steep discount to the ruling price of Rs 450 per share of face value Re 1 each in the secondary market, the issue has failed to garner investor interest.

That means something is wrong with the way the government is dealing with the divestment process," said Kishor Ostwal, chairman and managing director of CNI Research.

While small private companies, such as ARSS Infrastructure, a mid- size company which received bids for 127 times the issue size and Infinite Computers, another little known company, which received multiple subscriptions, public sector Navaratnas like power producer NTPC and iron ore major NMDC had to seek bailout assistance from their PSU peers.

" The government has to get market savvy and understand the market to take the divestment process forward successfully.

Otherwise it will only lead to the weakening of PSU majors '

like LIC and SBI," said Thunuguntla.

Ostwal wondered whether it would have been better for the government to go in for a strategic partner instead. " The government seems to undersell its assets. Instead of divestment in pieces, going for a strategic partner with a 49 per cent stake sale would have fetched funds equal to the disinvestment targets for a couple of years," said Ostwal.

" Anyway NMDC cannot be called a company of strategic importance. Opening it up for international bidding by strategic partners would have received very good response," Ostwal added.

The Centre was divesting 8.38 per cent of its 98.38 per cent holding in NMDC through this issue. At the upper end of the price range, the offer would garner Rs 11,700 crore and at the lower end about Rs 9,900 crore.

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Publication:Mail Today (New Delhi, India)
Date:Mar 13, 2010
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