Monday, December 22, 2014

ONGC stake sale in January likely to mop Rs 14,900 crore

ONGC CMD Dinesh K Sarraf
THE Centre is all set to sell its stake in ONGC by next month. The Cabinet Committee on Economic Affairs (CCEA) had approved the disinvestment in September.
This follows the massive success of the disinvestment process in SAIL earlier this month.
The Centre intends divesting 5 percent, or...
over 42.77 crore shares, in ONGC.
Based on the last closing price (December 19) of Rs 349.30, the Centre can mop up about Rs 14,900 crore from the sale. Currently, it holds 68.94 per cent in ONGC.
Earlier this month, the Centre had sold five percent of its equity in Steel Authority of India Ltd (SAIL).
The offer was oversubscribed more than two times.
The SAIL offering was the first public sector share sale under Narendra Modi-led NDA government after taking charge from the UPA government in May this year.
The government aims at collecting Rs.43,425 crore through selling shares in various state-owned firms during current fiscal.
ONGC’s share sale is critical for the Centre’s fiscal health as tax collections have been tepid.
The Centre will use the offer-for-sale route through stock exchanges (known as the auction method) for the share dilution. It will set aside a higher quota for retail investors.
Although SEBI norms prescribe only a minimum 10 percent for retail investors, for ONGC the Government proposes to reserve 20 per cent for them and also give a 5 per cent price discount. This concession is to be extended for the Coal India and the NHPC divestments, too.
According to media reports efforts are being made to work out a subsidy-sharing formula.
As part of the Centre’s subsidy-sharing mechanism to compensate PSU oil marketing companies for selling domestic LPG, kerosene and, till recently, diesel below market price, ONGC bears a sizeable part of the burden. ONGC shoulders almost half of the under-recoveries of oil marketing companies, hurting its profitability.
Now, the Centre is looking at various options that could reduce the burden for ONGC.
During road shows for the ONGC disinvestment, potential investors had raised concerns about the impact of the ad hoc subsidy-sharing mechanism on the oil major’s balance sheet.
Earlier, the petroleum ministry had given its in-principle approval for five percent stake-sale in ONGC which may fetch the government about Rs. 18,000 crore to meet disinvestment target for the current fiscal.
“Ministry of Petroleum and Natural Gas has agreed in-principle to the proposal of disinvestment of 5 per cent government stake in ONGC,” Minister of State for Finance Nirmala Sitharaman said in a written reply to the Rajya Sabha.
“ONGC, while supporting disinvestment of this equity held by government of India, has suggested resolution of a few issues, including fuel subsidy mechanism and gas pricing policy, to enable better price realisation from such disinvestment,” she said.
ONGC, a Maharatna PSU and India’s flagship energy major is engaged in exploration and production
of oil and gas in India and abroad.
A global player in energy, it contributes about 69 percent of India’s domestic oil and gas production. Currently, ONGC through its subsidiary ONGC Videsh Ltd., is India’s largest transnational corporate with overseas investment of over $10 billion in 16 countries.
As per the Budget 2014-15, the disinvestment target is Rs. 58,425 crore including receipts from disinvestment of government stake in the non-government companies.
The government also plans to sell five percent stake sale in ONGC, 10 percent in Coal India and 11.36 percent in NHPC.
Similarly, the department of disinvestment has already initiated the process for stake sale in MOIL Ltd. It has issued a Request for Proposal (RfP) for appointing merchant bankers and selling brokers for disinvestment of 10 percent equity in the PSU.
The Centre intends disinvesting 10 percent of its 71.57 percent holding in the company.

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