EGoM okays 10% Govt stake sale in IndianOil to ONGC, Oil India
17 Jan 2014 12:13 AM GMT
With Oil Ministry continuing to be opposed to selling IOC shares on stock market like other disinvestments, an Empowered Group of Ministers headed by Finance Minister P Chidambaram on Thursday decided to sell 24.27 crore shares or 10 per cent government stake in the company to Oil and Natural Gas Corp (ONGC) and Oil India Ltd.
'In-principle we have taken a decision for a block deal. Modalities will be worked out (soon),' Oil Minister M Veerappa Moily told reporters after the 35-minute meeting.
The stake sale will happen sometime next week after the boards of ONGC and OIL decide, Oil Secretary Vivek Rae said.
Sudhir Vasudeva, chairman and managing director of ONGC, which already holds 8.77 per cent stake in IOC, said 'most likely' the 10 per cent stake will be split equally between ONGC and OIL.
'The 5 per cent stake will cost us Rs 2,200 to 2,300 crore and this amount will not have any bearing on our capital expenditure plans,' he said. OIL is sitting on a cash pile of about Rs 8,000 crore.
'We feel that the share of IOC is grossly under-priced right now. And it commands more value. Normally, we would not want to do a block deal (but since share price is low) we thought we should follow this route which would enable revenues to be raised,' Rae said. IOC scrip closed 1.48 per cent up at Rs 212.05 on BSE.
The sale will be as per Sebi's rules for block deal which says the rate should be one per cent higher or lower than previous day's closing price, he said. 'Boards of two companies have to now meet to pass a resolution,' he added.
Rae said there will be no lock-in period and both ONGC and OIL would be free to encash their shares anytime. 'We had wanted that there should be no lock-in period (for selling off the shares) and I think the EGoM has agreed to this. And this meets our concern,' Vasudeva said.
Government in the past too had resorted to such block deals to shore up its revenues. In late 1990s, the government had sold shares in ONGC, GAIL and IOC to raise Rs 4,643 crore.
According to the cross-holding plan, ONGC bought 9.11 per cent in IOC and 4.83 per cent in GAIL. IOC bought 9.61 per cent in ONGC and 4.83 per cent in GAIL. GAIL in turn bought 2.4 per cent in ONGC.
In 2006, IOC sold 1.92 per cent, or a fifth of its holdings in ONGC for Rs 3,672 crore, recovering its entire initial investment and some more. It also sold half its holdings (2.41 per cent) in GAIL for Rs 561 crore.
The EGoM on 9 January, 2013 deferred disinvestment of 10 per cent stake in IOC through an offer for sale on the stock markets owing to strong opposition from oil ministry. The ministry felt IOC shares were way lower than the 52-week peak of Rs 375 reached on 18 January last year. The Finance Ministry had planned to sell 24.27 crore IOC shares to meet a tenth of its Rs 40,000 crore disinvestment target for current fiscal. Government holds 78.92 per cent stake in oil refiner IOC as on 30 June.
‘ONGC Palatana power plant’s 2nd unit to operate by June’
Agartala: ONGC’s second unit of gas-fired thermal power project at Palatana in Tripura will be operational in June this year, a top company executive said on Thursday. ‘After the successful operation of the first unit (363 MW) of the power plant, we have set a target of making the second unit operational by June this year. We hope that the second unit start generation before the target time,’ managing director of Oil and Natural Gas Corporation - Tripura Power Company (OTPC) S K Dubey told reporters. He expressed apprehension that transmission of the full load of power would be a problem if the Palatana plant could not be connected to the national power grid at Bongaigaon. ‘660 KM long transmission line from the plant to Burnihat in Meghalaya through Silchar in Assam was completed by which power from the first unit could be catered to other states of the north-east. But the work for the 400 KV double circuit high tension line up to Bongaigaon from Burnihat is pending due to forest clearance,’ he said. Dubey said Palatana power project is the most sought-after gas plant in the country which can generate one unit of power at Rs 3 only. If the central government decides to sell power to Bangladesh, High Voltage Direct Current (HVDC) line needs to be drawn and that is not an easy task, he said. Dubey further said the total project cost is Rs 4,000 crore, of which Rs 3,000 crore has already been spent and the annual turnover per year from the project would be around Rs 1,600 crore. Palatana is an environment friendly project and would soon make notification for carbon trading, he said adding, it will apply to UNFCC for carbon trading licence. Assam will get the maximum share of 240 MW, followed by Tripura (196 MW), Meghalaya (79 MW), Manipur (42 MW), Nagaland (27 MW), Mizoram (22 MW) and Arunachal Pradesh (22 MW).
'In-principle we have taken a decision for a block deal. Modalities will be worked out (soon),' Oil Minister M Veerappa Moily told reporters after the 35-minute meeting.
The stake sale will happen sometime next week after the boards of ONGC and OIL decide, Oil Secretary Vivek Rae said.
Sudhir Vasudeva, chairman and managing director of ONGC, which already holds 8.77 per cent stake in IOC, said 'most likely' the 10 per cent stake will be split equally between ONGC and OIL.
'The 5 per cent stake will cost us Rs 2,200 to 2,300 crore and this amount will not have any bearing on our capital expenditure plans,' he said. OIL is sitting on a cash pile of about Rs 8,000 crore.
'We feel that the share of IOC is grossly under-priced right now. And it commands more value. Normally, we would not want to do a block deal (but since share price is low) we thought we should follow this route which would enable revenues to be raised,' Rae said. IOC scrip closed 1.48 per cent up at Rs 212.05 on BSE.
The sale will be as per Sebi's rules for block deal which says the rate should be one per cent higher or lower than previous day's closing price, he said. 'Boards of two companies have to now meet to pass a resolution,' he added.
Rae said there will be no lock-in period and both ONGC and OIL would be free to encash their shares anytime. 'We had wanted that there should be no lock-in period (for selling off the shares) and I think the EGoM has agreed to this. And this meets our concern,' Vasudeva said.
Government in the past too had resorted to such block deals to shore up its revenues. In late 1990s, the government had sold shares in ONGC, GAIL and IOC to raise Rs 4,643 crore.
According to the cross-holding plan, ONGC bought 9.11 per cent in IOC and 4.83 per cent in GAIL. IOC bought 9.61 per cent in ONGC and 4.83 per cent in GAIL. GAIL in turn bought 2.4 per cent in ONGC.
In 2006, IOC sold 1.92 per cent, or a fifth of its holdings in ONGC for Rs 3,672 crore, recovering its entire initial investment and some more. It also sold half its holdings (2.41 per cent) in GAIL for Rs 561 crore.
The EGoM on 9 January, 2013 deferred disinvestment of 10 per cent stake in IOC through an offer for sale on the stock markets owing to strong opposition from oil ministry. The ministry felt IOC shares were way lower than the 52-week peak of Rs 375 reached on 18 January last year. The Finance Ministry had planned to sell 24.27 crore IOC shares to meet a tenth of its Rs 40,000 crore disinvestment target for current fiscal. Government holds 78.92 per cent stake in oil refiner IOC as on 30 June.
‘ONGC Palatana power plant’s 2nd unit to operate by June’
Agartala: ONGC’s second unit of gas-fired thermal power project at Palatana in Tripura will be operational in June this year, a top company executive said on Thursday. ‘After the successful operation of the first unit (363 MW) of the power plant, we have set a target of making the second unit operational by June this year. We hope that the second unit start generation before the target time,’ managing director of Oil and Natural Gas Corporation - Tripura Power Company (OTPC) S K Dubey told reporters. He expressed apprehension that transmission of the full load of power would be a problem if the Palatana plant could not be connected to the national power grid at Bongaigaon. ‘660 KM long transmission line from the plant to Burnihat in Meghalaya through Silchar in Assam was completed by which power from the first unit could be catered to other states of the north-east. But the work for the 400 KV double circuit high tension line up to Bongaigaon from Burnihat is pending due to forest clearance,’ he said. Dubey said Palatana power project is the most sought-after gas plant in the country which can generate one unit of power at Rs 3 only. If the central government decides to sell power to Bangladesh, High Voltage Direct Current (HVDC) line needs to be drawn and that is not an easy task, he said. Dubey further said the total project cost is Rs 4,000 crore, of which Rs 3,000 crore has already been spent and the annual turnover per year from the project would be around Rs 1,600 crore. Palatana is an environment friendly project and would soon make notification for carbon trading, he said adding, it will apply to UNFCC for carbon trading licence. Assam will get the maximum share of 240 MW, followed by Tripura (196 MW), Meghalaya (79 MW), Manipur (42 MW), Nagaland (27 MW), Mizoram (22 MW) and Arunachal Pradesh (22 MW).
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