Mumbai: Shares in Shipping Corporation of India, the country’s largest shipping firm, leapt by as much as a fifth on Wednesday after the Union cabinet approved a 10% stake sale in the state-run company.
The government also allowed the company, which plans to spend about $4.3 billion over two years to buy 57 new ships, to issue fresh shares for another 10% to part finance the expansion.
Analysts said the approval was a boost in the arm for the company and large investors would be interested in adding the stock to their portfolio, but the jump in prices was a knee-jerk reaction.
“The share price running up like that is a bit baffling for me,” said Ambareesh Baliga, vice-president, Karvy Stock Broking. “All the follow-on offers that have come recently, we’ve seen the share price correcting. So, I think this move up should be taken with a pinch of salt.”
Shares in Shipping Corp, which the market values at $1.6 billion, were trading up 15.8% at Rs194.6 by 11:51am in a Mumbai market that was up 0.7%. The stock had risen as high as 202.5, its highest since January 2008.
“The fair value of shares was Rs 165- Rs 170. It has run up beyond that, quite a lot, so cautiousness is warranted,” a shipping analyst with a local brokerage said.
The company, in which the government owns 80.12%, shortlisted SBI Capital, ICICI Securities and IDFC Capital as lead managers for the planned offering, three sources with direct knowledge of the situation had said in August.
Chintan Mewar, head of research at Finquest Securities, said the offering would improve liquidity in the stock. “With the positive news flow even institutions will want to have a share in this company. People would prefer to take position in larger shipping companies rather than going for smaller ones,” he said.
Foreign interest in Indian stocks is seeing a sharp rise as gloomy outlook for developed economies drive investors to faster growing emerging markets.
Overseas funds have moved a record $20.1 billion into Indian equities in the year to date, with more than a quarter coming since the start of September. The inflow has lifted the main BSE stock index to about 600 points from an all-time high.
The upbeat mood has revved up share sales, including by state companies. Coal India, the world’s biggest coal miner, is expected to hit the market in mid-October with an IPO to raise up to $3 billion.
Others in the pipeline include follow-on share sales in Hindustan Copper and Steel Authority of India. The government plans to raise $8.6 billion through stake sales in the current fiscal year that ends next March.