Tepid response to India’s ONGC sale clouds sell-off plans

Lukewarm investor response to the Indian government's $2.57-billion sale of a stake in energy giant ONGC has cast a shadow over New Delhi's plans to revive its privatisation drive, analysts said Friday.

The government had to scramble Thursday to dispose of the five percent holding it was selling in the state-controlled oil and gas producer after hoping the offer would be heavily oversubscribed.

“ONGC, which was expected to be the big ticket divestment, turned out to be a big dampener,” said Arun Kejriwal, an independent market analyst.

Investors took up just 98 percent of the offering, marking a stumbling start to the government's bid to resurrect a privatisation drive stalled last year by weak markets and policy paralysis, analysts said.

Analysts said the high price deterred investors from the hitch-ridden sale that ranked among India's five biggest equity share sales.

“The offer was priced too high, it should have been sold at a discount to the market price as is normally done -- not at a premium,” Sonam Udasi, research head IDBI Capital, told AFP.

ONGC's shares slid four percent Friday before recovering partially to close down 2.22 percent lower at 281.45 rupees -- significantly below the government's offer price of 290 rupees.

Just under 70 percent of the stake was sold before the offer closed Thursday afternoon, according to stock exchange websites that failed to update.

The government was forced to enlist state-run Life Insurance Corp to scoop up the rest of the shares, according to media reports.

LIC declined to comment on whether it had bought the shares in India's largest oil and gas producer.

It was the first privatisation through a newly approved auction route.