The government has deferred a follow-on public offer (FPO) to sell 5 per cent of its holding in the state-run oil and gas major ONGC, which would have fetched around $2.5 billion.

Although it is not disclosed why the issue has been postponed – the single largest FPO ever in India and the third biggest equity issue behind the public issues of Coal India and Reliance Power – reports have speculated that it is due to poor market conditions and disagreement over the pricing of the issue.

The government has said that it will evaluate the proposed issue but has not given a time frame for floating the same. However, it had plans to offer 419.2 million shares to the public, with 8.5 million shares reserved for subscription by eligible employees.

JM Financial, Citigroup Global, DSP Merrill Lynch, HSBC Securities, Morgan Stanley India and Nomura Financial were the book running lead managers to the issue, which was to open for subscription on Sept 20 and close four days later.

Investors, however, liked the move, with ONGC scrip shooting up almost 5 per cent in mid-day trade on the BSE to Rs 274 a share. At this price, the government’s 5 per cent stake is valued at Rs 11,700 crore or around $2.46 billion. Although the share price has increased since the FPO dates were announced, depreciation of the Indian Rupee has marginally shrunk the dollar value.

Since the FPO comprises only an offer for sale, all the money raised will go to the Indian government who can use it for containing the fiscal deficit. The timing of the issue is keenly watched as a long delay will mean the government will face problems in meeting its target for raising resources through disinvestment.

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