SAIL Share Price: Announces Offer for Sale II Details Explained

SAIL has announced to the Stock Exchange through a notice that the promoter, the Government of India, which owns a 75% stake would divest up to 206.5 mn shares (5% of total shares outstanding) with a green shoe option to sell another 206.5 mn shares on 14 January and 15 January. Assuming the entire deal goes through (including the green shoe option) at the floor price, the Government of India would be able to raise up to Rs 26.4 bn (US $360 mn).

The floor price for the offer has been set at Rs 64/share, a 14.3% discount to the current market price. In the near term, the Offer for Sale (OFS) could create volatility in the stock price because the floor price is at a material discount to the current market price. The OFS will be a secondary transaction. In Morgan Stanley’s view, it has no bearing on the fundamentals and financials of the company.

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Risks to Upside:

Domestic demand and the company's volume growth improving ahead of expectations
Faster project ramp-up leading to cost efficiencies and higher margins
Higher-than-expected domestic steel prices

Risks to Downside:

Continued high debt given gradual improvement in operating cash flow
Earnings improving but more slowly than Morgan Stanley expects 
 
The Nifty opened on a flat note and has been oscillating between red and green since then. Currently, it is trading up by 10 points. On the hourly charts, one can observe that after sharp intra-day swings in the previous trading session, the Nifty is trading within the range of 14653-14435 of the previous trading session. The hourly momentum indicator has a negative crossover and is still away from the equilibrium line, which is a sign of consolidation before resuming an upmove. The Bollinger Bands are contracting also pointing towards consolidation. The index is likely to consolidate at 14400-14650.

In terms of levels, 14425-14400 shall act as a support zone, while 14630-14650 shall act as immediate hurdle zone for the Nifty. Overall, Sharekhan continues to maintain positive stance on the Nifty for short-term target of 15000.

On the hourly chart, the Nifty is trading above the 20-hour moving average (HMA) and the 40-HEMA, of 14537 and 14419, respectively. The hourly momentum indicator has a negative crossover. Market breadth is negative with 895 advances and 899 declines on the National Stock Exchange (NSE).