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    Default Oil and Natural Gas Corporation stake sale offers little fiscal relief

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    The weak response to sale of a 5 per cent stake in state-run Oil and Natural Gas Corporation (ONGC) gives the government little relief as it scrambles to balance the national budget.

    ONGC shares slipped on Friday, a day after the sale, and analysts said the lukewarm response will make it more difficult for the government to sell off stakes in other state-run companies, a tactic it had hoped would ease the country's troublesome fiscal deficit .

    "Had this issue got a healthy response, the government could have lined up three or four more issues," said Jagannadham Thunuguntla, a strategist at SMC Global Securities. "It is high time the government gets their divestment strategy more organised."

    The government had aimed to raise $2.5 billion from selling a 5 per cent stake in ONGC on Thursday.

    At the close of trading on Thursday, stock exchanges were reporting that 292.2 million shares - about two-thirds of the offer - had been sold.

    India's two main stock exchanges and ONGC then issued a late-night press release, saying that some orders had been wrongly rejected and that final demand was actually for 420.4 million shares against the offer of 427.7 million shares.

    Thunuguntla said a surge of interest in the last ten minutes of trading contributed to the confusion.

    He said the government had tried to sell ONGC shares at too high a price. The Rs 290 floor price was a 2.3 per cent premium to the previous closing price.

    Lack of clarity about what share of India's fuel subsidies are shouldered by ONGC also clouded investor appetite, he said.



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