BS reported that investors in the Hindustan Copper auction issue are already staring at a loss. The price fell below the government set auction floor price of INR 155 on 27th 2012.
The issue had been subscribed largely by public sector banks and insurance companies at an average of INR 156.56. The share price closed on Tuesday at INR 153 on the stock exchanges.
State Bank of India and Punjab National Bank said that Hindustan Copper, the government's first disinvestment issue in this financial year had managed to sail through mainly on support from Life Insurance Corporation.
The offer for sale saw subdued response from large foreign institutional investors and private domestic investors such as mutual funds, although it was done at 41% discount to the market price. The share sale has yielded the government INR 800 crore.
This is the second divestment issue of 2012 where investors have suffered a loss. In March, the share price of Oil and Natural Gas Corporation had seen a sharp fall on the very next day of the auction.
The biggest loser was LIC, as it had put in around INR 12,000 crore to rescue the issue which had few takers. The average price at which the government sold ONGC shares was INR 303; the auction floor price was INR 290. These currently trade at INR 249. Both the National Stock Exchange and Bombay Stock Exchange have revised the circuit limits lower for Hindustan Copper from 20% to 10%.
The price has seen a sharp fall in the past three trading sessions. It had touched a high of INR 276 last week but started falling sharply after the government announced a floor price for the auction on November 22nd 2012. A minimum of 4% stake was offered for sale with an option to sell 5.59% more. Bids were received for 51,611,858 shares.
At INR 155, Hindustan Copper trades at 47 times its trailing Q4 earnings per share, possibly expensive by global standards. Copper prices are down a little over six per cent since October. Hindustan Copper's first half results saw net profit fall 13% even while its revenue rose 10.8% to INR 596.4 crore.
