Power Finance: Selling the Family Silver At Distress Price
Akin to the Telecom spectrum sold over the last decade in a most un-transparent manner, the GOI in a far-fetched ideal view is knocking off family silver at atrocious price. If investors were to look up the fate of GOI FPOs in the past 12 months, they would note that beside the exceptional case of Coal India every IPO has ultimately lost money for the Retail investors. So is it necessary to involve them in the first place?
I think not. For starters the moment a FPO is announced the existing holders of the stock knock it off the pedestal. Price declines in the case of SCI, REC, SAIL and PFC have been closer to 50 per cent post announcement and become larger post the FPO. Only six months ago both PFC and REC were quoting at roughly at Rs 400 and now they are halve the price and the GOI is still going ahead with the PFC IPO.
On a 10-20 per cent dilution in a Rs 40,000 crore market cap corporation the GOI receives sale proceeds lower by roughly Rs 2000 crore in each IPO. So is there a basic fallacy in this process?
For some reasons understood by the various ministeries involved the "Dutch Auctions" have been given up. But why give up the QIP route that targets both the FIIs/DIIs and MFs. Has it not been a much avowed policy in this country that retail should come to capital markets through the MF route? Then whey chide away the QIPs for FPOs-here there is no question of a price discovery as existing shares are already quoting, so if a QII is ready to pay market price then why not?
With a GOI divestment programme of Rs 400 bn for FY12, this disastorous GOI policy will cost the country and the public close to Rs 200 bn. Yes, you got it right-Rs 200 bn. An amount perhaps as large as some saner estimates of the 2G give away. So who will go in the next time? The PM or the entire Parliament?
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