An empowered group of ministers (EGoM) will decide the price ...
at which Indian Oil shares will be sold to ONGC and Oil India. The government had offered a 10 percent shareholding in IOC to ONGC and OIL at a discount of about 10 percent to the current price. The EGoM will meet again in the evening to decide on stake sale in BHEL through a block deal. The intention is to offload five per cent stake in the company which could yield between Rs 1,300-1,500 crore. The finance ministry aims to complete the sell-off process by March 31.
Earlier, the board of Oil India Ltd (OIL) approved the acquisition of a five percent stake in Indian Oil Corp (IOC) from the government at a discount to the market price. At a 10 percent discount to the current price, the government's sale of 24.27 crore shares (or a 10 percent stake) in IOC would mop up over Rs 5,400 crore. Ever since the EGoM headed by finance minister P Chidambaram on disinvestment cleared the stake sale in the nation's largest oil firm through a block deal on January 16, IOC shares have gained more than Rs 35 apiece. The EGoM had then cleared the stake sale at current market price, plus/minus 1 percent.
Subsequently, ONGC and OIL informed the petroleum ministry that they would each buy a five percent stake in IOC at the six-month average traded price and not at the current rate. Although the Cabinet had originally cleared the stake sale in IOC through an offer for sale, the finance ministry had to go in for the block deal route after opposition from the ministry.
A block deal order for a scrip should be within a range of one per cent from the ruling market price (last traded price). ONGC currently holds an 8.77 percent stake in IOC. The oil ministry had argued that IOC shares should not be sold through an offer for sale as the current price did not reflect the right valuation of the company.
On February 25, 2014, ONGC closed at Rs 282.05. The 52-week high of the share of ONGC was Rs 353.00 and the 52-week low was Rs 234.40. The company's trailing 12-month (TTM) EPS was at Rs 24.07 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 11.87. The latest book value of the company is Rs 145.47 per share. At current value, the price-to-book value of the company is 1.96.
As on March 31, 2013, Oil India had a cash reserve of Rs 18,610 crore while ONGC Rs 13,200 crore. There will be no lock-in period for shares, if transferred through the proposed route. It means that if investors want money for capital expenditure, they can sell shares any time.
With these two companies, disinvestment through direct sale of shares is expected to be over. The Government plans to launch an Exchange Traded Fund next month having shares of 10 Central PSUs as underlying assets.