Are the PSU IPOs being over-priced?
A look at the record of the past seven years, starting from the now-famous Maruti divestment in 2003, one sees that NHPC shares were offered at a P/E of 38.3, the highest in the 24 divestments, including follow-ons and bank IPOs, during the period under consideration.
The Oil India IPO, which opens next week in the Rs 950-1 ,050 price band, is at a P/E of a little over 10 at the higher end of the band.
A TOI analysis of PSU divestments since the Maruti issue in 2003 indicate that the government’s pricing strategy has been changing with time and it doesn’t want its enterprises to be undervalued . Says Dina Mehta, former BSE president and MD of Asit C Mehta Investment Intermediaries , ‘‘ Since public sector units are created out of taxpayers’ money, the benefit (its IPO) should also benefit them. Their issues should not be fully priced in a bid to attract mass participation.”
Source: Economic Times
