Over the past decade India has had contrasting ministers handling Public finance and disinvestments. In the early 1990's when Manmohanics was the buzz word the Govt displayed a weak exterior, divestment blues were washed away under the UTI (Unit Trust of India). Subsequently these proceed were used to further uneconomic and unviable options like subsidizing LPG , kerosene, power for the farmer and other frivolous items. The erstwhile Chairman of the Disinvestment Commission, Mr. G.V. Ramakrishna vehemently protested and termed this strategy as "selling family silver to pay for living expenses" When ever disinvestment deadlines were not made the corporation that advertises through trust being its middle name rampantly bought over valued stocks from the Govt stable. The poor investors were later shocked to realize that the difference between the Buy back price and the net asset value of US - 64 the premier scheme of UTI was significant and under reported. After all the mindless bundling of over valued public sector stocks to the UTI had to take its toll.

When the index rallied from under 1000 to over 4500 in 1992 the then finance minister Dr. Man Mohan Singh called it an off shoot of a robust economy It was only later that the Harshad Mehta scam brought to light the thousands of crores that were siphoned off from the banking system to create the off shoot of the robust economy. When stocks fell like nine pins the Minister quickly wiped his hands off and said, "I do not lose my sleep when the market falls".

On the other hand it appears that Mr. Arun Shourie the divestment Minister cannot sleep when the markets fall. Amidst all the chaos and confusion of bundling of issues and arguments as to how they could have been sequenced better with ONGC leading the fray Shourie was candid and blunt. The Minister did not hide his feelings He cried foul when the BSE index was hammered by over 5% prior to the Govt. divestment program and raised an alarm when IBP met with lackluster response on the first day of its IPO. He worked overtime and in a hurriedly called press conference talked about all options including the much too publicized allegation of "bear hammering by a concerted group of individuals led by a large private sector Corporate house". When the Minister held meetings with the Intelligence Bureau (to initiate investigation against the alleged bear lobby) the anxious advisors called it "issuers anxiety" while the business papers and news channels cried "faulty planning"

It was whispered in market circles that the advisors to the Govt. for these disinvestment programs had offloaded shares while their foreign clients hammered prices in a concerted bid so as to lower the IPO offer price. The IPOs were to be valued on the basis of ruling market prices The Minister how ever was un-relenting. The quick and sudden steps taken by Mr. Shourie were enough to send the message to the advisors "Perform or Perish" (though not in the literal sense). The Minister's slew of actions seemed to have worked out quite well. IBP that could hardly garner 3% subscription in the initial stages of issue was fully subscribed the next day. All other issues were oversubscribed (See table below) and when ONGC gathered more then US $ 2 Billion within the first ten minutes of its issue analysts/critics were still not convinced. In the morning analysts argued that FII were not paying money upfront and the commitment could be reversed as FII's are allowed to withdraw bids before the IPO closes In India two set of people have their tasks cut out - the opposition to oppose and the critics to criticize After all investors and analysts do not wish to change opinion too often and seek justification in every defeat. But by late afternoon (Friday March 05), markets were cheering and voting with their feet. Shourie had managed to pull it off. The grapevine also had it that Warren Buffet put in US1 billion through his Berkshire Hathway fund (later denied by the mogul of Omaha).

"When the Queen sells here jewels buy it" argues noted fund manager Peter Lynch. What Lynch probably fails to highlight is for investors to buy only when the queen sells them cheap. In U.K. Margaret Thatcher successfully seeked another term of elections by offering cheap shares of State run British companies. Similarly retail investors in India could also have been allowed to bid for PSU shares at substantial discount to market price.

Stock investments make only 4 to 5 % of the Indian Household savings while around Rs 18,00,000 crores are tied up in bank savings deposits - that is almost 2 times the total market capitalization of the Bombay Stock exchange. The Harshad Mehta and Ketan Pareikh scams have severely jolted the average Indian's perception about the Stock market. The ONGC issue could have been used as a classical case for spreading the equity culture. If the Govt can provide cheap Kerosene, urea, power, LPG to the under privileged sections of the society then why not cheap stocks of PSU companies. If retail investors were provided confirm allotment at about Rs 600 per share these bank savings can make a way into the Stock markets. A better way of categorizing these investors could be through a PAN card (an Income tax Registration certificate) i.e. anybody having a Pan card could apply for a confirm allotment of 100 shares. Through this the Govt. could also have increased the Registration ambit under the Income Tax Department manifold. In addition to canalizing the untapped wealth into the capital markets this strategy would have broad based the investor base. After all Indian capital markets should not rely on foreign money as the movers and shakers of the system. It is imperative to develop a parallel investor base Moreover it makes no difference for Govt. to price these issues at substantial discounts for retail investors. After all it is the taxpayers money that is being given back to him.

Source: Business Standard.

Basant Maheshwari is a Cost Accountant and a PostGraduate Diploma in Equity Research and Analysis from ICFAI (Hyderabad). Comments are invited at & .