This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
With its first divestment candidate this financial year, the government today fixed Rs. 83 as the base floor price for SAIL offer for sale (OFS) which is scheduled to be carried out on the stock exchanges tomorrow. Targeting Rs. 43,425 crore in divestment proceeds this fiscal year, the government has decided to sell its 5% stake in the company i.e. 20.65 crore shares.
At Rs. 83 a share, it seems that the government will be able to raise a minimum of Rs. 1,714 crore from this sale. Currently, the government holds about 80% stake in the company.
Before we consider the factors to decide whether we should invest in this OFS or not, lets first check the basic details of this offer.
Shares on Sale – The government will be selling 20,65,26,264 shares in the offer for sale, out of which 10% shares i.e. 2,06,52,626 shares have been reserved for the retail investors.
Offer Price – Share price of SAIL closed at Rs. 85.25 on the NSE today. The government has fixed Rs. 83 as the floor price in the OFS, which is a discount of 2.64% to its closing price. The floor price of Rs. 83 was disclosed by the government after market hours today. So, the market will react to this price in the trading hours tomorrow.
5% Discount for the Retail Investors – The company has decided to offer a discount of 5% to the retail investors. This discount will be offered on the price at which the company allots its shares to the retail investors.
Time Period – SAIL OFS will remain open for a single day only and that too, during the trading hours of the stock exchanges. You’ll get to know the status of your bids by 6 p.m. and if successful, you’ll get the shares allotted by the designated stock exchange on T+1 basis.
Once bidding starts, you can check the bidding status on the National Stock Exchange as well as on the Bombay Stock Exchange.
How does an OFS process work?
If you are investing in an OFS for the first time and want to know more about the process, here is the link to check the details about it. If you have any query regarding the process, please share it here, I’ll try to respond to it as soon as possible.
How to invest?
You need to contact your broker to know how it is facilitating the bidding process. I think most of the broking firms must be providing the investment facility through their online platforms. If you don’t have access to the online platform, you should contact the customer care department of your broker and get the bid placed through telephonic confirmation.
Should you invest in SAIL OFS?
I think it is not the best of the times for a company like SAIL to hit the capital markets. On one hand, global commodity prices including steel are on a steady decline as a result of falling demand and on the other hand, the pace of supply is expected to steadily go up in the next few years. So, these companies will continue to face pricing pressure in the absence of a demand pick-up.
As far as the financials are concerned, I think for a public sector company like SAIL, it doesn’t make sense to deeply study its financials and try to gauge its value based on certain financial ratios like price-equity ratio etc. I am saying this as firstly it is a government controlled company and secondly, it is into a cyclical industry.
The fortunes of companies like SAIL depend on various factors like economic health of the country, pace of industrial activity, global commodity prices and how well it is managed by the government and its officers.
In March 2013, the government sold its 5% stake in SAIL at a price of Rs. 63.07 per share. At Rs. 83 a share, the current government is seeking 32% premium to the last OFS price. I think the current price of Rs. 83 is fair and I expect around 35-40% returns from my investment in SAIL in the next 18-24 months. However, with positive economic environment, returns could also surprise on a positive side.
Shiv, this is a relevant link. Request you to approve the comment.
http://www.business-standard.com/article/companies/technical-glitches-mar-retail-investors-in-sail-sale-114120900940_1.html
Btw, called them again. They said money will be credited on 15th December.
Hi Neel, we are on the same page. I also applied @ 84.05 and got the same reply as you got from icicidirect.
My demat a/c got credited with the shares today but I am yet to receive the refund for the amount they overcharged (i.e. the difference of 82.50 minus 79.85).
Please keep me updated on the development at your end.
Cheers!
Jason, I have not received the amount yet. I received the shares today.
I have asked a penalty in addition to the refund.
I have not got a complaint number from ICICIDirect yet. I have written to [email protected]. Once I get it, I am going to approach SEBI and put an online complaint via SCORES.
http://scores.gov.in/
Basically, ICICIDirect has carried out an unauthorized transaction from your account on 8th of Dec. You can find details of the transaction in the contract note sent to you. Because of this, you did not get the shares on T+1 but T+3.
Jason, I have not received the amount yet. I received the shares today.
I have asked a penalty in addition to the refund.
I have not got a complaint number from ICICIDirect yet. I have written to [email protected]. Once I get it, I am going to approach SEBI and put an online complaint via SCORES.
Basically, ICICIDirect has carried out an unauthorized transaction from your account on 8th of Dec. You can find details of the transaction in the contract note sent to you. Because of this, you did not get the shares on T+1 but T+3.
Thanks Neel.
Thank you Shiv. I did call them again. These are the updates.
ICICIDirect guy tells me that there was a ‘technical glitch’ because of which my OFS order could not be executed. So they instead went ahead and executed an off-market transaction for me!!! They are going to refund me the difference between 82.50(settlement price) and 79.85(5% discounted price on bid). But the shares are only going to be credited on T+3!!!!
Now, I asked them who authorized them to carry forward the off-market transaction on my behalf, and they claim it was the BSE who did so!
The technical glitch, they claim was on the part of the BSE, something I am not very sure about. The problem for me however, is deficiency of service, because of which I could not exit on T+1; besides the BSE authorizing the trade on my behalf. I have told ICICIDirect that I am approaching the SEBI.
Shiv, a strange thing has happened. I bid at 84.05 for a retail amount(less than 2L). I bid thru ICICIDirect.com. I got the following message from ICICIDirect
“Dear Customer, Your Sail OFS order bid at Rs 84.05 was inadvertently not accepted. We have rectified the error and your demat account would be credited with XXXX shares by 10th Dec 2014 at the price bid by you.”
Now this is rotten because :
1. This was an OFS. So, because of someone’s error, I am being to made wait till 10th Dec for my shares. I wanted to sell on Monday and make a quick buck. That’s not happening, because shares are still not in my account.
2. ICICIDirect has sent me a contract note dated 8th Dec 2014 which shows SAIL price as 82.50!!!! I called ICICI and they cited the 5% discount on 84.o5. I told the person after 5% discount, it should come to 79.85. They were supposed to call me back in 15 minutes, but that has not happened!
Have you encountered such a situation with your other readers/clients? What is my redressal? Should I approach Scores?
Hi Neel,
I haven’t been approached by any of my clients/readers with such a problem. I think you should first try to get the matter resolved with ICICI Direct itself and tell them about your next step of approaching SEBI in case they do not take your case seriously. In case they do not co-operate, you should definitely take the matter to SCORES.
SAIL OFS finally got subscribed 207.88%. In the retail category, it got subscribed 266.17%. Its Clearing Price has been fixed at Rs. 84.05 for the Retail Investors and Rs. 83.50 for the Non-Retail Investors. Retail investors bidding at or more than Rs. 84.05 will get the allotment.
Hi Shiv,
I missed the opportunity today. But please keep us informed about the future PSU OFSs. We really appreciate it!
Thanks,
PP
Sure PP, I’ll do that.
Thanks shiv for very nice article..I have one doubt.suppose its indicative price is 83.41 and i bid at say 83.3 than will i get any allotment?
Hi Nirav,
It is very difficult to tell with surety whether you’ll get the allotment in your case or not. As the indicative price is the volume weighted average price of all the valid/confirmed bids, there is a likelihood that your bid price is lower than the indicative price and you’ll still get the allotment.
But, if the final price is fixed just below the indicative price, then there is a chance that you’ll not get the shares allotted.
Thanks Shiv I really look forward to your posts which have been dwindling.Little unclear. SAIL is quoting above 83 so if I buy today through OFS I still get at 83? Also are u saying this is a good option for long term sounded a little contradictory
Hi Harinee,
As a retail investor, you’ll get a discount of 5% on your successful bid price. Also, with Modi government’s style of working, I am expecting fireworks to start cracking soon. I think there is a huge scope of improvement with all these PSEs and all these PSEs present a good opportunity for medium to long-term investment.