The insurance behemoth was caught on the wrong foot as it was given to understand that it required to pitch in only with Rs 4,000 crore as there was adequate FII interest in the scrip, said marketmen.
“Very clearly, a bailout of this magnitude was not expected by LIC and matching of instructions from custodian to clearing house against bids made from empanelled brokers could not be completed in time,” said Mr Arun Kejriwal, Founder KRIS Research.
“LIC had asked its panel of brokers to place bids for the issue for a remuneration of one paise for a bid of one share and hence they were least interested in exhausting their quota of the bid allocated to them by LIC,” said a source privy to the developments.
Could not garner funds
But when subscription numbers showed 1.43 crore shares 10 minutes prior to the close of the offer, LIC could not garner the excess funds required to bailout the issue immediately and it took more than a few hours to do so.
This was due to the failure of the custodian to confirm the transaction, that is, bring such a huge sum of money for payout of funds against the shares to be bought even though the brokers had placed the buy orders.
“It is shocking that LIC bails out ONGC by subscribing to almost the entire issue but this act gets compounded when besides the bailout, it decided to bid at a premium that is almost four per cent higher than the floor price of Rs 290 a share,” said Mr Arun Kejriwal, Founder KRIS Research.
According to the Finance Ministry, the volume weighted average price for this issue was Rs 303.67 to a share. Those in the street observed that LIC's policy holder's bonuses could be hit if the stock tanks.
The ONGC scrip lost another 2.22 per cent on Friday and closed at Rs 281.45.