Why Govt Stake Sale Planning Hit Stocks
MMTC Ltd. (Metals and Minerals Trading Corporation of India)
CIL (Coal India Ltd.)
EIL (Engineers India Ltd.)
Nalco (National Aluminium Company Ltd.)
Hindustan Copper Ltd.
IOC (Indian Oil Corporation Ltd.)
NHPC Ltd.
NHPC nosedived nearly 26% on heavy volumes on 4th March 2013.
PPGCIL (Power Grid Corporation of India Ltd.)
SAIL (Steel Authority of India Ltd.)
Rashtriya Chemicals & Fertilizers Ltd.
Unlisted Stocks :
North Eastern Electric Power Corporation Limited (NEEPCO)
THDCL(Tehri Hydro Development Corporation Limited)
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Shares of disinvestment candidates such as MMTC, Nalco, SAIL, and RCF trading at 52-week lows
Punters pound stocks of state-run cos to grab them at dirt-cheap prices via the offer-for-sale route.
Shares of potential disinvestment candidatessuch as MMTCBSE -2.65 %, Nalco, SAIL, and RCF have taken a battering and are trading at 52-week lows, ahead of the government's 'offer for sale' (OFS) of shares.
The m-cap of the combined four— MMTC, Nalco, SAILBSE -1.67 % and RCF — have eroded by over Rs 45,000 crore in the past two months, ever since the Street got a whiff of the divestment news. "The carnage in these PSU shares is happening because 'bears' got an opportunity to hammer these counters as they hope to buy these shares at a low price. The government announcement is actually killing the stock," said Deven Choksey, MD of KR Choksey.
"The OFS route is destructive for existing shareholders; it's a structural problem for markets as fundamentally these companies are very sound," he added.
The government is going full throttle on divestment, and an EGoM is likely to meet thrice — between March 11 and 19 — to fix the price for selling stakes in MMTC,Nalco and SAIL to raise around Rs 5,000 crore, said some investment banking people familiar with the matter.
"As soon as an OFS is announced, 'bear sentiment' grips the stock. Smart investors generally exit the stock to buy again at a lower price as OFS is always at a discounted rate," said Pankaj Pandey, head of research,ICICI Securities. "If the stocks are in futures and options segment, then smart investors prefer to sell stock futures and later buy stocks in cash market at a lower price," he added.
According to data provided by ETIG on a 12-month trailing basis, all the four companies are making profits. SAIL, the largest integrated iron and steel producer in India, has posted sales of Rs 45,195.74 crore, and profit of Rs 3,300.8 crore in the past 12 months. MMTC, the largest exporter of minerals from India, has recorded revenues of Rs 3,1746.25 crore, and a profit of Rs 16.64 crore, during the same period. Nalco has clocked sales of Rs 6,727.69 crore and profit of Rs 628.9 crore in the past 12 months while RCF has reported sales of Rs 4,573.28 crore and a profit of Rs 276.89 crore during the same period
"Shares of these companies are trading at 52-week lows, but despite this, the government is divesting stake through OFS. This gives a signal that the government is trying to improve market sentiment," said Sandip Sabharwal, chief executive officer, PMS at Prabhudas Lilladher. "In the previous PSU divestments, investors have not made any money. But this time, investors have a good chance," he added.
"The current market condition is not very conducive to raising money from such large issues within a span of weeks. Investors will only participate in OFS if they find the price at the lower end," said Sonam Udasi, head of research at IDBI Capital.
The m-cap of the combined four— MMTC, Nalco, SAILBSE -1.67 % and RCF — have eroded by over Rs 45,000 crore in the past two months, ever since the Street got a whiff of the divestment news. "The carnage in these PSU shares is happening because 'bears' got an opportunity to hammer these counters as they hope to buy these shares at a low price. The government announcement is actually killing the stock," said Deven Choksey, MD of KR Choksey.
"The OFS route is destructive for existing shareholders; it's a structural problem for markets as fundamentally these companies are very sound," he added.
The government is going full throttle on divestment, and an EGoM is likely to meet thrice — between March 11 and 19 — to fix the price for selling stakes in MMTC,Nalco and SAIL to raise around Rs 5,000 crore, said some investment banking people familiar with the matter.
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"As soon as an OFS is announced, 'bear sentiment' grips the stock. Smart investors generally exit the stock to buy again at a lower price as OFS is always at a discounted rate," said Pankaj Pandey, head of research,ICICI Securities. "If the stocks are in futures and options segment, then smart investors prefer to sell stock futures and later buy stocks in cash market at a lower price," he added.
According to data provided by ETIG on a 12-month trailing basis, all the four companies are making profits. SAIL, the largest integrated iron and steel producer in India, has posted sales of Rs 45,195.74 crore, and profit of Rs 3,300.8 crore in the past 12 months. MMTC, the largest exporter of minerals from India, has recorded revenues of Rs 3,1746.25 crore, and a profit of Rs 16.64 crore, during the same period. Nalco has clocked sales of Rs 6,727.69 crore and profit of Rs 628.9 crore in the past 12 months while RCF has reported sales of Rs 4,573.28 crore and a profit of Rs 276.89 crore during the same period
"Shares of these companies are trading at 52-week lows, but despite this, the government is divesting stake through OFS. This gives a signal that the government is trying to improve market sentiment," said Sandip Sabharwal, chief executive officer, PMS at Prabhudas Lilladher. "In the previous PSU divestments, investors have not made any money. But this time, investors have a good chance," he added.
"The current market condition is not very conducive to raising money from such large issues within a span of weeks. Investors will only participate in OFS if they find the price at the lower end," said Sonam Udasi, head of research at IDBI Capital.
Source : nse2zoom,http://economictimes.indiatimes.com,BISWAJIT BARUAH,ET BUREAU
