Vol 2, PW 22 (11 Nov 98) Midstream & Downstream

Indias privatisation programme has begun, at last! Most predicted that the sale of 9m shares in the government-owned Container Corporation of India (CONCOR) would flop.

It hasnt, and the enthusiastic response from the market proves one thing: price an issue right, and investors will flock. Before the sale, the government held 77% of CONCOR, generally considered an "illiquid" stock.

Notwithstanding, the issue has been over-subscribed. Hardly surprising, if you consider the attractive pricing: Rs250 ($5.95) per share, a hefty 34% discount to CONCOR's last traded share price of Rs378 ($9) recorded on 15 October.

By the closing deadline of 14 November, some 40 investors - including 15 foreign institutional investors (FIIs) - put in bids for CONCOR stock. State Bank of India (SBI) wanted the most at Rs50 cr ($12m); Unit Trust of India (UTI) and Life Insurance Corporation (LIC) each bid Rs25 cr ($6m); the Industrial Development Bank of India (IDBI) bid Rs20 cr ($4.8m); while bids also came in from Citicorp, Morgan Stanley and HSBC (the latter two are also co-lead managers).

By pricing the issue at Rs250 per share, the government hopes the sale will net Rs225 cr ($54m), far short of its target of Rs5,000 cr ($1.2bn) from privatisation by the end of the fiscal in April 1999, but a step in the right direction. One can only hope that the forthcoming sale of GAIL, IOC and others will be similarly priced.