94% of PSU offerings since 2003 gained over 10% on debut trade
Moneylife Digital Team 04 October 2010

New Delhi: The forthcoming public offers of Coal India Ltd CIL and Steel Authority of India Ltd (SAIL) can be a roaring success if the debut history of 28 PSUs since 2003 is any indication, as 94% of these public sector companies (PSUs) listed with a premium of at least 10% on the bourses, reports PTI.

An analysis of 28 PSU stake sale offerings, starting from UCO Bank in 2003 to Engineers India Ltd (EIL) in 2010, shows that in comparison to the total issues, 63% of the offerings have generated significant value for investors over the issue price as of 29th September.

The analysis by investment banking Enam Securities concludes that although the gains registered by most of the PSUs on listing were not exorbitant, the majority of the offerings have provided over 10% listing gains (17 out of 26 companies), with 10 companies registering over a 20% gain on listing.

Moreover, PSU offers generally provide special discount for retail investors (usually 5%), which is an added attraction for PSU share offerings, Enam said.

"Unlike the general belief, history proves that PSU initial public offers (IPOs) have always left something on the table for retail investors to cheer upon," it said.

However, three PSUs (NHPC, NMDC and SJVN) — which hit the market during the last 13 months — were trading below their listing price as of 29th September.

"If we exclude these companies, considering their limited performance history, we arrive at a conclusion that all PSU offerings in the medium to long-term have offered significant positive returns, irrespective of listing day performance," the report said.

In the list of 28 companies, two entities (PNB and Allahabad Bank) suffered losses on debut listing, but even these companies' shares have gained 175% over their listing price as of 29th September.

Aiming to raise Rs40,000 crore through PSU disinvestment this fiscal, the government is divesting its stake in many state-owned firms, including Coal India, this financial year.

The government also plans to sell a 5% stake in Oil and Natural Gas Corporation (ONGC) and 10% in Indian Oil Corporation (IOC) to raise about Rs21,000 crore (Rs210 billion) this fiscal.

The government had mopped up about Rs2,000 crore in the first half of the current financial year through disinvestment.

The public offers of Power Grid Corporation and SAIL are likely to hit Dalal Street in the next two months.

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