Oil’s well?

The ONGC issues has raked in over Rs 50,000 crore already and all is well again with the BJP’s claim of India Shining. The disinvestment minister has to be congratulated for the triumphant achievement raising Rs 13,000 from six public sector undertakings (PSUs), that too in a single month at the close of the financial year. And since nobody argues with a dubious manoeuvre like threatening to set the Intelligence Bureau on short-sellers, investors will soon forgive or even justify Arun Shourie’s little anxiety attack that caused the turnaround in PSU sentiment.

Having said that, we believe that the celebration must be followed by serious introspection and follow up action. For starters, it is completely unacceptable for the disinvestment minister to allege that his investment advisors have indulged in short selling to depress the issue price and then not follow it up with a formal complaint to the Securities and Exchange Board of India (SEBI). At the least, such investment bankers have to be excluded from future disinvestment proposals. A second question emanates from the subscription pattern to the offers. An overwhelming per cent of the investment has come from Foreign Investors. Most of this has been focused on ONGC and the latter issues. Surely, such a high level of interest was not the result of Shourie’s outburst? The more logical conclusion is that foreign interest in Indian IPOs was always high, but that the investment advisors had either failed to gauge it correctly or report it properly to the minister.

Consider further the government’s complaints about the poor marketing of issues and the bunching of offers and you have serious doubts about the competence of advisors. Now that Project Disinvestment has been a big success, Shourie may like to forgive and forget the mistakes that led to mid-way panic, but that is not in the interest of the capital market. SEBI must be asked to conduct a thorough, if confidential, investigation into the disinvestment process. It must analyse the subscription and allotment and submit a report to the government in order to help it to plan future divestment efforts more systematically. SEBI must also analyse why the surge in foreign investment has failed to enthuse the secondary market.