Technical glitches mar retail investors in SAIL sale

It is a case of the proverbial slip between the cup and the lip. Several hundred retail investors who bid for shares in the offer for sale (OFS) of Steel Authority of India Ltd (SAIL) last week have not received the promised five per cent discount.  

Last-minute changes in the OFS mechanism and data entry glitches have led to the loss, brokers and investors told Business Standard.  

The Union government raised Rs 1,700 crore (Rs 17 billion) on Friday by selling a five per cent stake in the steel behemoth, kicking off its divestment programme that aims to raise Rs 43,425 crore (Rs 434.25 billion) by March.

Retail response was significant as investors subscribed for more than twice their allotted quota.  

Suresh Kumar, a Delhi-based investor, remitted around Rs 1,95,000 and was allotted about 2,300 shares in the offer, at the cut-off price of Rs 85.

However, post the discount, his allotment price should have been Rs 80.75. “Either they should have rejected our application for entering the wrong category or have rectified the error and given the discount. Last time, too, I had applied in the government share sale. Then also, prices went down. This time we were happy that they announced the discount. But for no fault of ours, we are not getting it," he said.  

He was worried that as the share falls further, he might not be able to sell it. “Retail investors bidding below Rs 2,00,000 had to pay all the money upfront, unlike non-retail ones who had the option of paying after allotment. Now I am stuck. Hamara koi nahi sun raha hai (nobody is listening to us),” he added.  

This loss on discount is hurting as the stock price has fallen below Rs 80 after the sale, said a Delhi-based broker.

The shares' floor price was fixed at Rs 83 and were sold at a cut-off of Rs 85, following heavy subscription. They closed Tuesday’s trade at Rs 79.45.  

“Between 300 and 400 people have not got the discount because of the technical issues. We have written to Sebi (Securities and Exchange Board of India), which has asked the exchanges to look into the matter,” the broker added.  

The Government of India, to encourage retail investors’ participation, offered a discount of five per cent to this category, with application money less than Rs 2,00,000.

However, they were to pay the full amount before bidding, a change which Sebi announced through a circular on December 1, only four days before the share sale. 

Brokers said by default, while punching the bids, the trading terminals of BSE and the National Stock Exchange showed a 'Non-retail Series', whereas in the earlier OFS, there was only one series, ‘IS’.

“Since by default the Non-retail category series was being shown while punching bids, several investors and dealers at broker offices, inadvertently, punched retail investors’ application in the wrong category. Though the shares were allotted, these investors remain deprived of their due. A huge number got affected,” said a dealer with a local brokerage.

Brokers claim they were supposed to enter only client codes and the exchanges could have rectified the entries, since their databases had all details about the investors. This did not happen. An Exchange official said, “ If the broker enters the category as retail the investor will get a discount. If he enters non-retail he won’t.”  

Investors said the discrepancy was brought to the notice of the exchange officials and investment bankers as early as Saturday.  

The bids on Bombay and national Stock Exchange were to be made in following series:  

BSE:  

RI Category------ (Retail ; upto Rs 2,00,000)  

NII category------(Non retail: over Rs.2,00,000)  

NSE: 

IS Series (For Non-retail : application greater than Rs. 2,00,000 lakh)  

RS Series (For Retail: application less than Rs.2,00,000 lakh)  

Source: Brokerages