The Hindu : People pulling down stock prices identified: Shourie

Online edition of India's National Newspaper
Thursday, Feb 26, 2004

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People pulling down stock prices identified: Shourie

By Our Special Correspondent

NEW DELHI, FEB. 25. The lukewarm response of investors to the public issues of important public sector companies, particularly IBP, has put the Government on the back foot.

The Disinvestment Minister, Arun Shourie, today said that the Government had identified those responsible for pulling down the stock prices but added that there was little that could be done against them.

"The Securities and Exchange Board of India (SEBI) has informed us about the pulling down of prices by certain players," he said. He asked the financial advisers to the public issues to motivate and inform the public.

The SEBI has sought data on trading patterns in the public sector stocks, such as those of IBP and IPCL, to study any instances of price hammering. "The regulator has been closely watching the stock movements and is seeking information when prices move up and down," sources told mediapersons in Mumbai. This was a part of its normal market monitoring mechanism, they said.

To meet the disinvestment target of Rs. 14,500 crores this fiscal, the Government is selling its residual stake in CMC, IBP and IPCL. The initial public offering (IPO) of the Dredging Corporation of India opens on Thursday, to be followed by those of the Gas Authority of India Limited and the Oil and Natural Gas Corporation.

In the midst of a continuous decline in the Sensex, the IPOs have not evoked an enthusiastic response from investors; this was particularly noticeable in the case of IBP.

Mr. Shourie said that the market was being hammered on the basis of the assessment of the last trading prices of these shares, which was a "misnomer."

The floor price of the IPOs on offer had been determined in a professional way by merchant bankers. Insisting that the six issues — sale of residual equity in IPCL, CMC and IBP and partial disinvestment in ONGC and GAIL and 20 per cent in the Dredging Corporation — were on track, he said that the final sale price would be determined on the strength of the company and advice from experts.

After meeting financial advisors and SEBI officials, Mr. Shourie said he would inform the Prime Minister, the Deputy Prime Minister and the Finance Minister about the developments. "We have identified the people behind it. ... Some people worked in anticipation that the Government would announce a 5-10 per cent discount from the last closing price while announcing the floor price," he said. "The Government attaches great importance to the success of these issues... they (the advisers) are our partners in this and it is their job to motivate and inform the investors. Their function does not end with giving us a price band. They must also go and inform the correct position to the public."

On whether the disinvestment target would be met by March 31, the Minister said that the financial advisers had expressed confidence in this regard. "We are studying each and every issue separately. ... There can be many explanations for this kind of response, but the Government will not go in for a distress sale of shares in any of the companies.''

On the behaviour of the stock market, especially in the last few days, Mr. Shourie said, "There is a great story to be done... a book to be written on the character of Indian markets."

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