SAIL OFS - Has Government faltered?

By Research Desk
about 3 months ago

Steel Authority of india Ltd (SAIL) came out with bumper Q3FY21 results, while same results if extrapolated, consideirng the present performence of the sector, SAIL is capable of posting an EPS of Rs. 24 for FY22, while it may be seen at Rs. 7.50 for FY21. Loss before tax of Rs. 1,500 crore in H1FY21 and additional tax provision for Deferred Tax of Rs. 1,300 crore in Q3 FY21 made PAT to fall in FY21, while these things will not be there in FY22. SAIL having opted for lower tax from FY 20 (of 22% plus 10% surcharge and 4% Cess thereon, with effective rate working out at 25.17% as per Section 115BAA) will have an advantage of lower tax by 3.43%, as also, gives certainity of better performnce of the sector and of SAIL seen over next 2-3 years.

Inspite of such an exemplary performance of Q3 FY21, Govt made an OFS of 41.30 crore shares at an effective rate of Rs.67.50, which made share to fall to Rs. 58 in the secondary market. Strangely, Govt offered shares to employees of SAIL at Rs. 67.35, with offer closed on 27th January. Even offer  size to employee was reduced from 5% of total capital to 0.50%. Obviously, no employee would have subscribed it.

Question is, what was necessity of hurrying OFS, when it was atleast known to the Govt. (being Promoter of SAIL) of such an exemplary numbers seen coming in? Only Government can answer it? But few insiders say that, OFS of 41.30 crore shares and secondary market net purchase of about 18.70 crore shares were seen from the secondary market in last 2 weeks, by quality investors. So, now, 65% stake in SAIL is held by Govt., 17% by institutional investors, about 15% having mobilised by the strong hands in last 2 weeks with 3% seen as public float. This is bound to see sharp rise in share price of SAIL in the next 3-4 months, and will not be surprised to see share hitting 3 digit mark in this period.

Share price of SAIL as such rose from rs. 34 to Rs. 80 in 2 months of Nov & Dec, by about 135%. So now, with such low float, won't be surprised to see share rising by 72% from here in the next 3-4 months as well, to kiss 3 digit mark. 

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