The disinvestment drive of the NDA government kicked off on a positive note on Friday, with offer for sale (OFS) in steel giant SAIL receiving an overwhelming response from investors. However, market experts believe that it could have resulted in far higher returns if the government had a strategic planning.

The stake sale of 5% in SAIL through a one-day offer was over-subscribed by more than two times by the end of the day. While those reserved for retail investors (who invest up to Rs 2 lakh) was over-subscribed by 2.6 times.

It may, however, be noted that the share price of SAIL has registered a decline by over 10% since the Narendra Modi government took charge in June. The SAIL offer on December 5 was at the floor price of Rs 83, which was below the closing of Rs 85.35 a day before.

Pranav Haldea, managing director, prime database, which compiles data on capital markets and related issues, said the absence of market excitement is not the reason for the fall in the share price of SAIL just before the disinvestment process.

“Had it been announced in such a manner that the market did not get the opportunity to beat down the price, it could have resulted in a far higher return.” He added: “The delay in the disinvestment process despite good market condition has been disappointing from the NDA government. It (the government) delayed the disinvestment process because it looked at maximisation as the main objective. But the fact is that you can never time the market.”

The Modi government assumed power in May but there had been no PSU share sale so far.  While the overall market has rallied by over 16% since the Narendra Modi government took charge, the PSU index has seen a nearly 3% decline during the same period.

Surjit Bhalla, the chairman and managing director of Oxus Investments, a Delhi-based economic research, asset management, and emerging-markets advisory firm, however, said the over-subscription of the share sale of SAIL shows that the government is serious in meeting its disinvestment target.

“PSUs have traditionally lagged behind. This is mainly because the government owns a large chunk of PSUs and thus it has a lot of political interference. But the divestment is a sign that they will be more professionally managed and it is a good sign for investors who are interested to invest in them.”

Industry experts said its success would boost confidence of the government which is ready to divest its share in more companies to meet its disinvestment target of Rs 58,425 crore in the current fiscal.

A senior analyst at SBI Mutual Fund who did not wish to be named, said the over-subscription of SAIL in the beginning of the disinvestment process is a good sign for other companies as well.

“Overall markets are performing well, and foreign investors too would be interested in some of the companies which are to be divested.” For instance, he added, because of oil reforms, ONGC is likely to do well; and some of the selected larger PSU banks would also perform well in the process.

The floor price, which is the minimum offer price for SAIL's share sale was set at Rs 83 per share. With the sale of 5%, the government would earn Rs 1,715 crore. The government stake in the company now stands at 75%.

The disinvestment plan of the government, which has lined up a host of PSUs, includes 5% stake sale in ONGC, 10% in Coal India and 11.36% in NHPC.

However, an Indian Express report said the SAIL issue saw limited participation from foreign institutional investors (FIIs). Of the total amount raised by the government in the SAIL issue, LIC alone subscribed to 40% of the total shares on offer, by investing around Rs 700 crore, as per the report.

Other government-owned financial institutions to participate were State Bank of India and General Insurance Corporation which invested around Rs 150 crore and Rs 50 crore, respectively.