Here’s why ONGC shares slipped 5% today

Shares of state-owned Oil and Natural Gas Corporation (ONGC) dropped nearly 5% in early trade on Wednesday, in an otherwise positive broader market. The share price of oil and gas major declined as much as 4.8% to hit a low of ₹162.85 in the first two hours of trade so far, compared to 568 points, or 1%, gain in the BSE Sensex, which was quoting at 58,512.

ONGC shares dived after the government proposed to sell up to 1.5% of its stake in the company to raise about ₹3,000 crore through an offer for sale (OFS). The government, which currently holds 60.41% stake in the company, is selling shares to meet its revised disinvestment target of ₹78,000 set for financial year 2021-22.

The floor price for the OFS has been fixed at ₹159, a 7% discount to Tuesday’s closing price of ₹171.05 on the BSE. ICICI Securities, Kotak Mahindra Capital, Citigroup Global Market, HSBC Securities, and UBS Securities have been appointed as seller brokers.

On Wednesday, ONGC shares opened with a loss of 4.76% at ₹162.90 on the BSE. At 11 AM, the largecap stock was trading down by 4.3% at ₹163.70, after hitting a low of ₹162.85 during the session so far. On the volume front, there was spurt in selling as 11.18 lakh shares worth ₹18.33 crore changed hands over the counter on the BSE against two-week average volume of 11.78 lakh stocks. The market capitalisation of the Sensex heavyweight slipped to ₹2.05 lakh crore.

ONGC stock price has been falling for two sessions and dropped 7.4% during the same period. It has fallen more than 8% in a week, while it gained 2% in one month. The stock price has given a positive return of 58% in one year, while it rose 14% since the beginning of the calendar year 2022.

The government proposes to sell up to 9.43 equity shares of the company (or 0.75% of the total paid up equity shares), with a green shoe option to offload an additionally 0.75% equity shares. The offer will open on March 30 and close on March 31.

“The promoter (the government) proposes to sell up to 94,352,094 equity shares of the company, (representing 0.75% of the total paid up equity share capital of the company), on March 30, 2022, (for non-retail Investors only) and on March 31, 2022 (for retail investors and for non-retail Investors who choose to carry forward their un-allotted bids) with an option to additionally sell 94,352,094 Equity Shares (representing 0.75% of the total issued and paid up equity share capital of the company) through a separate, designated window of the BSE and the NSE,” the country’s leading oil and natural gas producer said in an exchange filing on Tuesday.

As per the company, only non-retail investors will be allowed to place their bids on March 30, while they may carry forward their un-allocated bids next day. Retail Investors will be allowed to place their bids on March 31, 2022. A minimum of 25% of the shares will be reserved for mutual funds and insurance companies, 10% for retail investors, and 0.075% for employees.

“Only retail investors shall be allowed to place their bids on T+1 day, i.e., March 31, 2022. Further, those non-retail investors who have placed their bids on T day (March 30) and have chosen to carry forward their unallotted bids to T+1 day, shall be allowed to revise their bids on T+1 day as per the OFS guidelines,” the release noted.