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Ahead of offer, ONGC shortlists three new independent directors

New Delhi: Gearing up for its follow-on public offer (FPO), state-run ONGC has commenced the process for appointing the requisite number of independent directors (IDs) as stipulated by market regulator Sebi's listing agreement. “We have appointed a search committee for selection of independent directors and it has shortlisted three new IDs and the process will be complete by February. Then the road will be clear for the company,” ONGC CMD RS Sharma told FE. “The ONGC's FPO aims to raise around Rs 10,000 crore from the capital market,” he added. The company has already appointed global consultants for the third-party certification of ONGC's reserves. DeGolyer & MacNaughton (D&M) and Gaffney, Cline & Associates (GCA) are the two auditors appointed for the purpose.

As per Sebi norms, 50% of directors on the board of a company wanting to list should be independent, if the chairman is a functional director. ONGC has only four independent directors out of the board of 12 members. Chances are that the government would defer the ONGC FPO to early next fiscal, as mega offers of the other two Maharatna companies, IOC and SAIL, would precede it.Apart from ONGC, the other companies that are not compliant include Manganese Ore (India) and SAIL. The government plans to sell 5% of its shares in ONGC through FPO. The company will ask the two reserve auditors to certify reserves in 15 key oil and gas fields out of about 150 discoveries it had made in the country. The company is going for a third party estimation of reserves about two years before it is due to arrive at correct valuation of the company before the follow-on public offer. ONGC normally goes for such estimation once in five years.Third-party reserve estimation is also a requirement before a public offer of any exploration and production (E&P) company.

ONGC has also urged the government for a stock-split prior to the proposed FPO. A Rs10 share (face value) could be split into two, especially since the market price is way above Rs1,300.The ONGC board will also consider a proposal for a bonus issue to the existing shareholders. The oil major had come out with a 1:2 bonus issue in 2006. Similarly, when it had come out with an IPO in 2004, the company had offered a 5% discount to retail investors. ONGC aims to make the FPO attractive for retail investors and employees by offering discounts.

Ronojoy Banerjee, Rajat Guha / The Financial Express

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