ONGC Climbs to Nine-Month High on Share Auction: Mumbai Mover

India's Finance Minister Pranab Mukherjee
Pranab Mukherjee, India's finance minister. Photographer: Simon Dawson/Bloomberg

Oil & Natural Gas Corp., India’s biggest energy exploration company, climbed to a nine-month high after the government approved a plan to raise 124 billion rupees ($2.5 billion) by selling shares at a premium.

ONGC rose 3.5 percent to 293.20 rupees, the highest level since May 16. The stock has climbed 14 percent this year compared with a 15 percent gain in the key Sensitive Index.

The government approved the auction at a minimum price of 290 rupees a share, which is 2.3 percent higher than yesterday’s close. Finance Minister Pranab Mukherjee is seeking to raise funds as he struggles to meet a budget deficit target of 4.6 percent of gross domestic product after slowing economic growth lowered revenue receipts.

“I was expecting the floor price to be a little bit of a discount to yesterday’s close and the premium shows the government’s confidence in the company and the potential demand for the offering,” U.R. Bhat, managing director of Dalton Capital Advisors India Pvt., said by telephone from Mumbai. “Investors will buy the stock because state-run companies provide some kind of stability.”

The government will offer 427.77 million ONGC shares, equivalent to a 5 percent stake in the company, at tomorrow’s sale, according to a filing to the National Stock Exchange. The auction will open at 9:15 a.m. and close at 3:30 p.m., according to yesterday’s filing.

“We are confident the sale will be fully subscribed,” Oil Minister S. Jaipal Reddy told reporters in New Delhi today.

Sensex Slump

A panel of ministers approved the sale yesterday, Reddy said. The state owns 74 percent of the explorer.

A 25 percent slump in the Sensex index in 2011 undermined efforts to sell shares of state-owned companies, with the government meeting 3 percent of its 400 billion-rupee target for the year ending March 31.

The government in November scrapped a proposal to sell a 5 percent stake in New Delhi-based ONGC in a public offering. Plans for sales in other state companies including Bharat Heavy Electricals Ltd., Steel Authority of India Ltd. and Hindustan Copper Ltd. have also been delayed.

Mukherjee said Jan. 11 that it will be “difficult” for the government to achieve its deficit target. Revenue collection reached 63.3 percent of the annual goal in the nine months to December, compared with 73.2 percent in the same period a year ago, according to the Controller General of Accounts.

The Securities and Exchange Board of India, the market regulator, announced the rules for sale of shares through auctions to institutional investors on Feb. 1. The National Stock Exchange of India said a mock bidding session would be held in preparation for the ONGC share auction.

Trade unions oppose the government’s plan to sell stakes in state companies, saying it will lead to job losses. Banks closed and bus services were canceled yesterday as millions of Indian government employees joined a nationwide strike to protest asset sales and the cost of living.

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