The choppy stock market conditions and rising crude oil prices have taken their toll with the Central Government on Thursday announcing advancement of disinvestment in Oil and Natural Gas Corporation (ONGC) to March 2011 and pushing the IOC stake sale to next fiscal.
“The follow-on-public offer (FPO) of ONGC will happen before the end of March 2011,” Petroleum Secretary S. Sundareshan said at a news conference here. The Cabinet had on December 1 approved the sale of government's 5 per cent stake in ONGC to raise up to Rs.13,000 crore.
The share stake sale of IOC, which was previously said to take place in the last week of January 2011, has been pushed to 2011-12 fiscal. “As far as IOC FPO is concerned, there was no Cabinet decision for the share offering. The Department of Disinvestment says only one issue from the oil sector can take place this fiscal and that will be ONGC,” the Petroleum Secretary said.
The Cabinet has not yet approved the sale of its 10 per cent share holding in IOC that at current market price would fetch close to Rs.9,000 crore. IOC has already appointed six merchant bankers for the FPO, which was to be clubbed with a similar size offering to raise funds for the company's expansion plans.
However, officials said rising crude oil prices and the mounting subsidy burden had made IOC less attractive to investors. The firming up of international oil prices means that it will lose more money on fuel sales as difference between domestic retail price and imported cost widens.
On the other hand, ONGC gets international price for the crude oil it produces. Merchant bankers for the ONGC FPO will be appointed in January, while the red herring prospectus that will incorporate financial details of the first three quarters will be filed by January-end.
Post-offer, government shareholding in ONGC would come down to 69.14 per cent from 74.14 per cent. As a precursor to the share sale, ONGC will split equity shares with a face value of Rs.10 each into two shares of Rs.5 each. It will also issue a 1:1 bonus.
After the share split and bonus issue, the market value of ONGC's shares will dip to around Rs.324. The government plans to raise Rs.40,000 crore through disinvestment of its minority stake in public sector units in the current fiscal, up from around Rs.25,000 crore in 2009-10.
