ONGC fiasco: Why Sebi should bar govt from the markets

If the Tatas, Birlas or Ambanis had done what the government did (or did not do) on Thursday in ONGC’s 42.77 crore share sale offer through the stock exchanges (a.k.a. auction), market regulator Sebi would have barred them from accessing the markets for a limited period and financially penalised them.

But then, the finance ministry is Sebi’s boss. The laws of the market are for other lesser folk, not the government - which is above the law on issues of corporate governance.

At the outset, let’s dismiss all the minor allegations of corporate impropriety and governance in this case. Let’s forget the fact this is a mockery of the disinvestment process. Let’s also forget that a large portion of the investment is cash shifted from one pocket of the government to another (from LIC or SBI to the Consolidated Fund of India).

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

[caption id=“attachment_231847” align=“alignleft” width=“380” caption=“f it didn’t think so, both LIC and SBI could have put in their bids earlier and avoided last-minute gymnastics. Reuters”]  [/caption]

Let’s again forget that the company whose shares are being sold has no interest in doing so, and is in fact miffed about the government’s policy of handing over its cash to loss-making oil marketing companies.

At the very least, once a government wants to proceed with this charade, it could have at least choreographed it sensibly. When you want to collect Rs 12,000 crore from investors - free and captive ones - the least you can do is show some competence in raising the money without glitches.

Impact Shorts

More Shorts

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

As Trump weaponises tariff, Fed sees a bigger worry: Not jobs, but rising prices in America

But look what happened.

Till half an hour before close, neither the National Stock Exchange (NSE) nor the Bombay Stock Exchange (BSE) saw big money coming in. It was only when it became clear that the issue would fail to get its Rs 12,000 crore target that the government panicked, and probably arm-twisted some of its cash-rich entities (Life Insurance Corporation and State Bank of India, among them) to somehow put in the money to rescue the auction from ignominy.

This is what they tried to do, but came up against the stock exchange’s rules and closure time. For six-seven hours after the official close of the auction at 3.30pm, no one knew whether the issue was subscribed or undersubscribed. Even as late as 11 am on Friday morning - at the time of writing - we don’t know who subscribed to the full offer, and what really happened.

On Thursday, there were strange mutterings about technical glitches that prevented LIC’s orders from getting registered on the system, but the explanations - even if true - only betray the incompetence of the government’s handlers.

In fact, three business newspapers had varying versions of what happened.

The Economic Times had this to say: “The auction took a mysterious turn when stock exchange websites stopped updating the bids 10 minutes before the scheduled close. The government said the system was jammed because of a rush of last-minute bids. Market watchers said the technical glitch was a blessing for the government because it would be almost impossible to find out if some bids came after the scheduled closing time.”

Surely, some funny business was going on?

A BusinessLine report poses this question through the mouth of Arun Kejriwal, founder of Kris Research: “What happened between 3.20 pm and 3.30 pm that the exchanges are not able to give subscription figures even after two hours?” The newspaper, quoting stock market sources, confirms that “LIC and State Bank of India subscribed heavilyto the issue in the last 10 minutes, while the FIIs kept away…”.

Free investors like FIIs obviously know when to stay clear of a mess-up.

A joint statement by the NSE and BSE said that the issue had not got fully absorbed when the market closed. The statement said: “While the buy orders at both exchanges reflected a demand of 292 million shares around the market close, there were certain buy orders which were not immediately confirmed or were erroneously rejected by custodians due to a mismatch at the custodian end, even though the orders were funded. These orders were not reflected in the demand of 292 million shares. After rectification of these errors, the final demand was for 420 million shares. Monies and orders received after normal market close have not been considered by the exchanges in the offer for sale.”

Reading between the lines, it seems there were mismatches at the custodian end - which means the investors came in late. If they had come in early, the errors could easily have been rectified during market hours.

It seems obvious that the LIC-SBI rescue act was an after-thought. The government was probably cocky enough to believe that everyone would be eager to get their hands on an oil share when global oil prices were rising. If it didn’t think so, both LIC and SBI could have put in their bids earlier and avoided last-minute gymnastics.

In cricket, the regular singles are a surer road to victory than the chancy last-ball sixer.

It is also clear that this is a shot-gun disinvestment - one that has neither the approval of the managements concerned nor the parent ministries of the companies. When asked about the ONGC disinvestment, Petroleum Minister Jaipal Reddy brushed it off saying it was the decision of the department of disinvestment (DoD). “The money that accrues from the sale gets accredited to the public exchequer,” he said.

BusinessLine, quoting sources, says that “ONGC’s top management was virtually kept out of the loop on the decision to offload the stake, with neither the ONGC chairman nor the company secretary reportedly present at the meeting that fixed the floor price (at Rs 290).”

When disinvestment is done without even a consultation with the company involved, and there is no buy-in even from the rest of the cabinet, it means that it is being done for collateral purposes. It is no different from a private promoter buying and selling his own shares for personal gain - the minority shareholders and other stakeholders can go to hell.

If Sebi Chairman UK Sinha has the interests of the stock market and shareholders in mind, he should consider barring the government from the capital market for the next one year. He can’t impose a fine, for any fine collected by Sebi goes back to government.

Sinha can single-handedly change the obscenely greedy behaviour of a recalcitrant promoter called the government of India.

In India, the finance minister is Gordon Gekko.