The partial disinvestment of the state-owned Steel Authority of India (SAIL) last week is turning out to be a case of the proverbial half-full or half-empty glass.
With some major achievements under its belt in the past including the start of a state-of-the-art blast furnace, India’s largest, at its IISCO Steel Plant (ISP) the offer for sale (OFS) to dump 5% of its equity (about 206 million shares) to raise $275 million was subscribed twice over, much of it bought by “heavyweight” institutional buyers such as the Life Insurance Corporation of India (LIC).
While the government called the over-subscription “positive,” some analysts were not so sure, pointing to the fact that LIC and some other banks had picked up about 45% of the shares that were available. This, despite the fact that retail investors had bid for more than twice the number of shares that were up.
With this sale, India has reembarked on it ambitious program to sell off some of the government’s stakes in state-run companies. The positive response from investors to the sale of SAIL shares could pave the way for forthcoming divestments, including a stock offering in Coal India Ltd., the world’s largest coal miner.
According to this report in The Business Standard, a year and a half ago the government had to work hard to sell a 5% stake in SAIL. A few hours before the issue was scheduled to close, the LIC bailed out what would have been a failed sale by buying a major chunk of unsold shares.
Last week, though, the market was bullish, and even retail investors bid for more than twice the number of shares on offer; but, “in spite of strong demand, LIC was the biggest participant once again, mopping up nearly 40% of the shares on offer.”