The Department of Disinvestment (DoD) has moved Cabinet for selling 10 per cent shares in Indian Oil Corp (IOC), the nation’s largest oil firm, to raise over Rs 7,000 crore.

DoD last week moved a draft note for consideration of the Cabinet Committee on Economic Affairs (CCEA) for selling 24.27 crore or 10 per cent shares out of Government holding of 78.92 per cent, through an offer for sale (OFS).

It sought comments on the proposal ministries of law, petroleum, public enterprises and finance besides Planning Commission within 15 days, sources privy to the development said.

IOC is currently largest refiner with 51.2 million tons of capacity and over 10,500-km of oil pipelines. The company, which had a networth of Rs 57,877 crore, posted a net profit of Rs 3,955 crore in 2011-12, down from Rs 7,445 crore in the previous year. Its profits had touched Rs 10,221 crore in 2009-10 and have declined since then because of having to sell fuel at below-market price for which it does not get fully compensated.

At Monday’s closing price of Rs 288.90 on the Bombay Stock Exchange, sale of 10 per cent government stake will fetch Rs 7014.35 crore.

Sources said the DoD has preferred the OFS method for the divestment as the alternative follow-on public offering (FPO) was a long drawn process requiring regulatory (SEBI) clearances.

While some shares would be reserved for mutual funds and insurance companies, employees of the company may be allotted shares over and above the proposed 10 per cent divestment.

In all 0.5 per cent or 1.21 crore shares would be allotted to eligible employees at a discount of 5 per cent to the issue/discovered price of the OFS, they said.

Besides deciding on the number of tranches for the share sale, the CCEA would also decide whether to retain the over-subscribed amount.

The DoD would by next month float the tender for appointing merchant bankers and legal advisors for managing stake sale of IOC.

The proceeds from IOC disinvestment are likely to be the second largest after Coal India in the current fiscal.

The government aims to raise Rs 40,000 crore through PSU stake sale in 2013-14 and expects to mobilise around Rs 17,000 crore from Coal India disinvestment.

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