IOC, ONGC ipo in January March 2011
Ministry clears IOC, ONGC selloff plans, to approach Cabinet soon
The Economic Times / The Telegraph / DNA /The Financial Express / Business Standard / Deccan Herald / The Hindustan Times / The Hindu
NEW DELHI: The government has firmed up plans to sell stakes in state-run oil majors ONGC and Indian Oil Corp, after giving their prospects a leg up earlier in the year by decontrolling price of petrol and increasing that of other products. “The ministry has taken an in-principle decision on the sale of the stakes and we have to go to Cabinet now (for approval),” said petroleum secretary S Sundareshan. The government plans to divest 5% of its stake in ONGC and 10% in IOC, which will also issue 10% fresh equity in a follow-on public offer.
The two companies are planning the public offers between January and March 2011, the oil secretary told reporters. If the plan materialises, the government would be able to easily raise the budgeted RS 40,000 crore from disinvestment in the current fiscal. The department of disinvestment, which is responsible for listing PSUs, has lined up five more firms for stake sales in the fiscal and was looking for one more big-ticket offer. The other companies that will hit the market this year include Coal India, Hindustan Copper, Manganese Ore India, SAIL, Power Grid Corp and Shipping Corporation. According to the selloff proposal, IOC would be the first to be disinvested, followed by ONGC. The government expects to raise Rs 20,000 crore from the sale of its stake in these companies.
Post divestment, the government’s shareholding in ONGC will come down to 69.14% from 74.14% currently. In IOC, the twin divestment and stake sale would reduce the government holding from 78.92% to 64.57%. On Monday, ONGC’s shares gained 0.9% to close at Rs 1,350.10 on the Bombay Stock Exchange while IOC gained 0.09% to close at Rs 425.10. The government’s plan to divest stakes in the two companies comes after its decision in June to decontrol petrol prices and raise prices of diesel, kerosene and cooking gas. IOC’s share has risen nearly 25% since companies got limited freedom in pricing petroleum products on June 25. ONGC is up over 15% over the same period on the prospects of a lesser subsidy burden against a 4.8% for the Nifty over the same period.
“I feel that this is the appropriate time to go for disinvestment as well as for the FPO because we are in need of money for our projects,” IOC chairman BM Bansal told ET Now, this newspaper’s television channel. Analysts are upbeat that the disinvestment would help improve the valuations of the two companies but stressed on the need to work out a subsidy sharing formula, which would give clarity on the losses of these state-run companies. The government regulates retail prices of diesel, kerosene and cooking gas and both IOC and ONGC are forced to share a part of the burden. In 2010-11, state-run oil firms are expected to suffer a revenue loss of Rs 57,000 crore, which could be even higher if global crude oil prices average more than $70 a barrel mark.
http://www.thehindu.com/business/Economy/article617582.ece
