Shares of public sector undertakings (PSUs) have been under pressure ever since the government decided to dilute its holding in MMTC at a steep discount to the then prevailing market price. Currently, there are around a dozen PSUs in which government has to bring down its holding to 90% before August 8.
Interestingly, even as market players say that investors are wary of the fact that the government could adopt a similar approach while diluting its stake in other PSUs in which it has to bring down its holding, the government fixed a floor price of R70 for selling 4.01% stake in Hindustan Copper. The floor price is at a discount of nearly 4% to the current market price of R72.65.
The stake sale is expected to fetch around R245 crore to the exchequer. Meanwhile, Hindustan Copper lost nearly 7% on Tuesday to close at R72.65. The copper manufacturer hit a seven-year low of R65 during intra-day trade.
Last month, the government fixed a floor price of R60 while selling 9.33 crore shares of MMTC. The floor price was at a discount of nearly 72% to the then market price of R211. Since June 12, MMTC has lost 56% and is currently trading at R92.90. Following that, State Trading Corporation of India (STC) has corrected nearly 40%. National Fertilizers, Hindustan Copper and India Tourism Development Corporation (ITDC) have all shed in the range of 11-20% in the same period.
Market experts say that investors are expecting other PSUs to follow the MMTC example of selling shares at steep discounts. ?The market price of a stock usually corrects if an OFS is pegged at a discount to the market price. So, investors have started booking profits,? said Anand Bagaria, senior research analyst, Finquest Securities.
In the current calendar year, STC has lost 58.07% in value ? making it the biggest loser among the state-owned companies that are yet to comply with public shareholding guidelines. ITDC and Neyveli Lignite, the large-cap stocks, have slipped by 16% and 26%, respectively.
Market observers also feel that the pressure on the share prices would increase with the increase in supply. ?While in the near term, the OFS programme would have an impact on the PSU stocks, companies with strong fundamentals would continue to draw investor interest. Meanwhile, in the current market scenario the overall mood towards PSUs remains dormant,? said Sonam Udasi, senior vice-president (research), IDBI Capital.
The 60-share BSE PSU Index has shed more than 15% in the current calendar year even as the benchmark Sensex gained marginal ground in the same period.