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The auction for sale of government's 5 per cent stake in ONGC on Thursday got bids for 29.22 crore shares worth about Rs 8,500 crore, but could fetch only about two-third of the targeted proceeds of over Rs 12,000 crore. At the end of the one-day auction, the auction got total bids for 29.22 crore shares, including 19.92 crore on the NSE and about 9.3 crore on the BSE platform, exchange official said. The final figures were yet to be updated on the websites of the two bourses.
The government had proposed to sell about 42.77 crore shares through the auction at a floor price of Rs 290 a piece.
The total bids were worth about Rs 8,500 crore and accounted for 68.3 per cent of the total offer size.
In the event of the total number of orders received at or above the floor price being less than the number of shares being offered for sale, the government would have the right to either conclude the sale to the extent of subscription or cancel the sale.
The shares would be allocated on 'price-priority' basis, meaning the bidders at highest price would be allotted shares.
The bids were mostly in the price range of Rs 290-293 per share for the auction, which commenced at 9.15 am and closed at 3.30 pm today.
The government had fixed a floor price of Rs 290 per share for the share sale through this one-day auction, wherein it was targetting to raise about Rs 12,000-13,000 crore.
The bidding began on a weak note and only about 37,500 shares were bid for in the first hour. Till 3 pm also, total bids had come in for only about 1.43 crore shares, but the momentum picked up in the last 30 minutes.
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ONGC shares dipped 1.9% as a last minute bid by Life Insurance Corporation, the state-owned insurer, helped complete the process. The total planned sale was 42.77 crore shares. LIC is believed to have invested close to Rs 4,000 crore. The auction for the shares will help the government raise over Rs 12,000 crore. The sale of ONGC shares is part of the government's divestment programme.
Here are 10 facts on the ONGC auction:
1) At market close, bids were received for 29.22 crore shares, according to ONGC chairman Sudhir Vasudeva. The company's share price dipped 1.8 per cent after gaining 1 per cent in early morning trade. In an auction, bidding typically intensifies towards the end of the trading session. A Reuters report said that State Bank of India, the largest public sector bank, could bid in for ONGC shares. Sources told NDTV Profit that LIC has helped the government complete the entire auction process.
2) This is the biggest equity offering this year. The government could hope to get Rs 12,400 crore if the issue is priced at Rs 295 per share. The auction for 42.77 crore shares started at 09:15 am and ended at 3.30 pm. The floor price was set at Rs 290 per share. The minimum bid quantity was one share (lot size of one share). Citi, JM, Nomura, DSP ML, Morgan Stanley and HSBC Securities are the investment bankers for the deal.
3) The government sold a part of its stake in ONGC to meet its divestment target of Rs 40,000 crore. The government is widely expected to miss its deficit target of 4.6 per cent of GDP for the current fiscal year ending March, partly due to its inability to meet the budget target for more than Rs 40,000 crore in state-company share sales. So far this fiscal year, the government has only raised about Rs 1,250 crore.
4) The government had earlier planned to sell ONGC shares through a public offering but that plan was scrapped last October after tepid response from investors amid weak equity markets. India's stock market posted its first annual fall in three years in 2011, losing nearly 25 percent. Shares in ONGC fell 20 percent in the same period. But the stock market has rebounded in 2012 and the BSE Sensex has climbed nearly 15 percent, with foreign funds scooping up beaten shares worth more than $7 billion.
5) There was no scope for retail investors to participate. That is because there was no discounts and reservation for retail investors. Normally, 35 per cent of the shares in a public offer are reserved for small investors. "The only disappointment would be on the retail side because retail investors would not be able to participate... Usually retail investors get a discount but that's not happening," RS Sharma, Former CMD of ONGC told NDTV Profit on Wednesday.
6) Big foreign funds, including sovereign funds from Abu Dhabi and Kuwait, had assured the government that they would buy the 5% stake, according to reports. Funds from Singapore and London reportedly also informally underwrote the stake sale. Life Insurance Corporation (LIC) was also expected to bid in today's auction, according to the market buzz.
7) This is the first stake sale being done via auction route. Only last month, the Securities & Exchange Board of India (Sebi) allowed shareholders of the country's top 100 companies by market value to raise funds by auctioning their stakes through stock exchanges. Bankers said while investors would be able to participate in the auction in the same way as in the previously used follow-on share offering, the owner of a company would save significant cost and time in the auctioning process.
8) How does the auction work: Multiple orders from a single buyer shall be permitted. The indicative price & cumulative bid quantity shall be made available on exchanges at regular intervals. Allocation will be intimated to the bidding broker on T+1 basis. Stock exchanges will collect 100% of the order value in cash. No single bidder other than MFs & insurance companies will be given more than 25 per cent shares.
9) Valuation: Rs 290 was a very good price. The stock was valued at Rs 330 on 2013 earnings per share (EPS), which is 9-times FY 13 price earnings, Sanjiv Prasad, Executive Director and Co-Head of Kotak Institutional Equities told NDTV Profit yesterday. The multiples can be re-rated to 10-11- times given the optimistic outlook in the markets, he added. However, the market has not accepted this argument.
10) A successful auction in ONGC shares will pave the way for divestment in other public sector companies like heavy engineering goods firm BHEL and steel major SAIL.
(With inputs from Reuters)
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ONGC shares dipped 1.2% as bids for over 97 lakh shares were received up to 2.30 pm on Thursday. This accounts for about 2 per cent of the total planned sale of 42.77 crore shares. The bidding has picked up a bit after a slow start for the first two hours when bids for only over 35,000 shares were received. The government is offering to sell 5 per cent of its stake (42.77 crore shares) in the state-run oil explorer. The auction for the shares, which takes place today, will help the government raise over Rs 12,000 crore. The sale of ONGC shares is part of the government's divestment programme.
Here are 10 facts on the ONGC auction:
1) As of 2.30 pm, bids were received for 97,03,894 shares. The company's share price dipped 1.2 per cent after gaining 1 per cent in early morning trade. Institutional investors are likely to bid later and try to keep their bidding prices under wraps. In an auction, bidding typically intensifies towards the end of the trading session. A Reuters report said that State Bank of India, the largest public sector bank, could bid in for ONGC shares.
2) This is the biggest equity offering this year. The government's holding will come down to 69.14% from 74.14% currently post the share sale. The auction for 42.77 crore shares will start at 09:15 am and end at 3.30 pm. The floor price has been set at Rs 290 per share. The minimum bid quantity is one share (lot size of one share). Citi, JM, Nomura, DSP ML, Morgan Stanley and HSBC Securities are the investment bankers for the deal.
3) The government is selling part of its stake in ONGC to meet its divestment target of Rs 40,000 crore. The government is widely expected to miss its deficit target of 4.6 per cent of GDP for the current fiscal year ending March, partly due to its inability to meet the budget target for more than Rs 40,000 crore in state-company share sales. So far this fiscal year, the government has only raised about Rs 1,250 crore.
4) The government had earlier planned to sell ONGC shares through a public offering but that plan was scrapped last October after tepid response from investors amid weak equity markets. India's stock market posted its first annual fall in three years in 2011, losing nearly 25 percent. Shares in ONGC fell 20 percent in the same period. But the stock market has rebounded in 2012 and the BSE Sensex has climbed nearly 15 percent, with foreign funds scooping up beaten shares worth more than $7 billion.
5) Retail investors can participate but market participants say they will not be able to compete with big fund houses and institutions. That is because there will be no discounts and reservation for retail investors. Normally, 35 per cent of the shares in a public offer are reserved for small investors. "The only disappointment would be on the retail side because retail investors would not be able to participate... Usually retail investors get a discount but that's not happening," RS Sharma, Former CMD of ONGC told NDTV Profit on Wednesday.
6) So, who will buy: Big foreign funds, including sovereign funds from Abu Dhabi and Kuwait, have assured the government that they will buy the 5% stake, according to reports. Funds from Singapore and London have reportedly also informally underwritten the stake sale. Life Insurance Corporation (LIC) is also expected to bid in today's auction, according to the market buzz.
7) This is the first stake sale being done via auction route. Only last month, the Securities & Exchange Board of India (Sebi) allowed shareholders of the country's top 100 companies by market value to raise funds by auctioning their stakes through stock exchanges. Bankers said while investors would be able to participate in the auction in the same way as in the previously used follow-on share offering, the owner of a company would save significant cost and time in the auctioning process.
8) How does the auction work: Multiple orders from a single buyer shall be permitted. The indicative price & cumulative bid quantity shall be made available on exchanges at regular intervals. Allocation will be intimated to the bidding broker on T+1 basis. Stock exchanges will collect 100% of the order value in cash. No single bidder other than MFs & insurance companies will be given more than 25 per cent shares.
9) Valuation: Rs 290 is a very good price. The stock is valued at Rs 330 on 2013 earnings per share (EPS), which is 9-times FY 13 price earnings, Sanjiv Prasad, Executive Director and Co-Head of Kotak Institutional Equities told NDTV Profit yesterday. The multiples can be re-rated to 10-11- times given the optimistic outlook in the markets, he added.
10) A successful auction in ONGC shares will pave the way for divestment in other public sector companies like heavy engineering goods firm BHEL and steel major SAIL.
(With inputs from Reuters)
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The auction for sale of the government's 5 per cent stake in ONGC gained momentum by early afternoon, as bids came in for about 1.43 crore shares.
The bids have been mostly in the price range of Rs 291-293 per share for the auction, under which the government has proposed to sell about 42.77 crore shares. The auction commenced at 0915 hours and would close at 1530 hours today.
The government has fixed a floor price of Rs 290 per share for the share sale through this one-day auction, wherein it is targeting to raise about Rs 12,000-13,000 crore.
At 1245 hours, bids had come in for a total of 47.7 lakh shares.
The early morning bids had come in the price range of Rs 292-294 a piece, but the price fell to Rs 291-292 by late morning.
In the first hour of auction, bids had come in for about 37,500 shares, while it rose to about 1.7 lakh by the end of second hour of the bidding.
The bidding picked up momentum by the mid-day and bids for more than 10 lakh shares had come in at 1200 hours.
Investment bankers said that the bidding was expected to gain further ground in the last 2-3 hours.
After an initial spike of about one per cent, ONGC share prices had turned weak and was trading 0.6 per cent down at Rs 291.50 at 1250 hours. The stock price has remained above the floor price of Rs 290 and had touched a high of Rs 296.50 within minutes of market opening this morning.
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