Mumbai: The floor price for the follow-on public offering (FPO) of Rural Electrification Corporation Ltd (REC) has been fixed at Rs203 per share, following a meeting of an empowered group of ministers.
The REC issue that opens on Friday will be the second FPO under the government’s disinvestment road map. The floor price is at a discount of nearly 8% to REC’s Wednesday closing price of Rs220.15 on the Bombay Stock Exchange.
This is in sharp contrast to the FPO of NTPC Ltd, which was the first FPO under the French auction norms, laid down by the capital markets regulator Securities and Exchange Board of India last year. Under such norms, retail investors are allowed to buy at a fixed floor price, while institutional investors bid at prices above that.
In the NTPC issue, the floor price of Rs201 a share for retail investors was fixed at a discount of 4.8% to the closing price of NTPC at Rs211.25 on 1 February, when the issue floor price was announced. The discount further declined to about 2% on 3 February when the NTPC issue opened. The poor response to the NTPC issue forced the disinvestment ministry to tweak auction rules and provide a higher discount for retail investors.