16
Sep
11

ONGC FPO deferred ???

If some news report are true then it looks like on account of pricing difference with i-bankers, government has decided to defer ONGC FPO by 15 days. Government wanted FPO price band to be closer to 280 whereas i-banks were saying price of 240-250. I don’t know what will change in the next 15 days. Everything has been turned into a joke by this government. ONGC FPO has been deferred several times. In this volatile market, who will buy ONGC at Rs 280 ? I guess only LIC and Public Sector Banks (PSB’s). If government wants so, they can do private placement as well. I guess there are better stories in market than buying ONGC at 280. First of all you, can’t decide on subsidy sharing formula and continue milking company as per your whims and fancies. Arbitrarily you change subsidy burden of upstream companies from 33% to 38.8% and expect market to pay top dollar for issue. May be government is expecting that market will realize true potential of ONGC in the next 15 days and they will be able to price issue at 280 rupees.

I was positive on ONGC issue at 245-250 rupees and at that price it was a compelling long. In fact, I am long on ONGC (bought one November future) and was planning to build further long positions after FPO price band is declared. I also sold ONGC 280 call (thankfully I have not written any naked call). It’s a covered call strategy. But surely I won’t buy ONGC shares at 280 rupees. Hope better sense prevails in Delhi and the issue is priced attractively.

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