Buoyed from profit after gas price hike, ONGC to sell stake

ONGC CMD DK Sarraf

THE government is likely to sell 5 percent stake in state-run explorer Oil and Natural Gas Corp (ONGC) next month, finance ministry sources said following a meeting of the disinvestment secretary with merchant bankers on October 20.

The union cabinet cleared the stake sale last month.

In view of the new gas rate announced on October 18, which at $6.1 per unit (current $4.2) effective from November 1 will directly benefit oil exploration companies, it is the right time to divest, says...

a media report.

The disinvestment department has selected Citigroup, HSBC Securities, UBS Securities, ICICI Securities and Kotak Mahindra Capital for managing the divestment, he added.

Earlier, petroleum minister Dharmendra Pradhan confirmed about the ONGC stake sale.

The government last sold five percent stake in ONGC in 2012 for Rs.14,000 crore and the government holds 68.94 percent share in the state-run company.

The proposed stake sale is likely to fetch the government about Rs 12,000 crore to partly meet the disinvestment target of current fiscal.

The country's biggest gas producer will gain an additional profit of Rs 1,950 crore this fiscal from the government's decision to raise price of gas from domestic fields.

ONGC chairman D K Sarraf earlier described the move to hike gas price as a "big upside" for the company, "especially in the backdrop of the fall in global crude prices. "This is an impetus for us and covers the gas discoveries we plan to monetize shortly," .

Fall in crude prices has an impact on ONGC's revenue. Since oil prices are expected to remain subdued, an increased gas production with higher price could offset the adverse impact of lower crude.

The company has a lineup of several small and marginal fields, which will come into production in two to three years. "Every $1 rise in gas price increases our revenue by Rs 4,000 crore and net profit by Rs 2,350 crore," he said.

According to preliminary estimates ONGC's net profit will go up by about Rs 4,700 crore on an annualized basis due to the hike in gas price announced by the government on Saturday. The company would gain about Rs 1,950 crore in the remaining five months of the current fiscal.

The clause that a premium would be paid for gas discoveries made in deep sea and ultra-deep sea as well as high temperature, high pressure finds, will attract investments.

The Maharatna PSU is ranked No 3 E&P company in the world as per Platts and among the top 5 energy company in Asia. With a market valuation of over Rs 3.5 trillion, ONGC is the most valuable Indian PSU. ONGC is ranked 21 among the global oil and gas operations companies. It is also Fortune’s Most Admired Company under Mining and Crude Oil Production category. ONGC through its subsidiary ONGC Videsh Limited (OVL) is India;s biggest transnational company, present in 16 countries with 32 projects and a cumulative invest ment of over $12 billion. ONGC has been awarded the Most Attractive Employer Award instituted by Ma Foi Randstad to encourage best practices and building the Employer Brand.