The Govt. chose the easy way out to go for auction route instead of the FPO. Apart from saving time the amount collected was much higher.
Had the government gone for a FPO, there would have been allocation for QIBs, HNIs and retail and retail would expect a discount as per earlier govt. issues.
While there is proportionate allotment in IPOs and FPOs, the government chose to price priority allocation, meaning the bidders at higher prices upto the cutoff price will get allocation.
The issue got a very tepid response till very close to the end time with only 1.35 crore shares being bid for.
Both exchanges stopped updating bids and also the volume weighted average price (VWAP) which should have been displayed in the last half hour of bidding was missing.
With the fiasco, Govt received only legitimate bids for 42.04 crore shares against the stipulated 44.77 crores.
Among this LIC alone bid for 40 crore share. Even at the volume weighted average price of 303.67, this turns out to more than 12000 crore out of the total collection of 12766.75 crores from the auction.
LIC's stake in ONGC as on 31.12.2011
| Life Insurance Corporation of India | 27,63,97,908 | 3.23 |
This means effectively 67 crore shares are now being held by LIC which means almost 7.9% stake in ONGC.
With govt. divestment the stipulated outcome is the distributed ownership of shares among FIIs, DIIs, HNIs and retail, with more emphasis on retail ( as evident through discounts).
But what we saw in case of ONGC auction ( offer for sale) was more of a QIP ( Qualified Institutional Placement) of shares to LIC ( at large 98% of the issue)
