THE GOVERNMENT'S CONCERN over the initial tepid investor response to the oil companies' shares on offer is understandable. There have been high expectations that the public share offerings of the oil companies along with those of the Dredging Corporation of India, CMC and a few others would send out salutary messages all round the economy and not just for the disinvestment programme. Together these share issues are expected to mop up around Rs.17,000 crores, comfortably exceeding the target set for the disinvestment programme for the year. What is relevant to the success of the programme is that such large sums will be realised without setting off another round of controversy over the methodology of sale. By relying entirely on the capital market route, the Government has avoided the pitfalls in the strategic sale method. When the strategic sale route was attempted last time — in another public sector unit also in the oil sector, HPCL — the opposition was such that not merely that particular sale but the entire disinvestment programme was stalled.

In two companies, IPCL and CMC, which have already moved to the private sector, the Government is selling its residual stake. The other companies will remain in the Government fold even after the share issue, but with a substantial addition to their list of outside investors. Importantly, the Government has shown a willingness to look beyond fiscal considerations. The wholehearted reliance on the domestic capital market to offload its shares is a significant step meant to favour Indian investors over the long term. A mix of domestic and overseas offerings would have resulted in higher price realisations and, by reducing the size of the individual share issues within India, made them more marketable. Indian investors, especially in the retail segment, have been favoured in other ways too. For the first time, a differential pricing model is being tried out with individual investors getting a lower floor price than institutional investors. The new issues market, which had gone into a moribund state, has got a tremendous boost from the Government's decision to soak it with high quality share issues.

Yet what should have been a win-win situation for both the Government-issuer and the investor class has not materialised at least in these early days. The IBP issue has met with a lukewarm response; the issues of IPCL and CMC have been oversubscribed but not by the multiples hoped for. Clearly investors seem to have lost some of the bullish fervour that hoisted the Sensex by 73 per cent over the past 12 months. With the secondary market showing signs of renewed volatility, subscriptions to the new issues as well as their pricing may be adversely affected. These have prompted the Disinvestment Minister, Arun Shourie, to accuse an unnamed bear cartel of short-selling these shares. Large chunks of these shares have, in fact, been sold ahead of the public offers but it is not certain this was done to spoil the Government's plans. The bunching of share issues, with the key ones emanating from one sector alone, has ruled out large institutional support for all the companies. As fund managers have to work within rigid sector-specific and country-specific limits, they cannot possibly invest in equal measure in all the oil companies. Hence some recycling and swapping of portfolios was always on the cards. Some of these constraints are affecting individual investors also. Faced with a surfeit of high quality issues and a compressed time frame, investors have been left with little scope to shift from one public offer to another.