Divestment dept puts off IOC stake sale roadshows
5 Oct 2013 4:33 AM IST
The Department of Disinvestment has put off overseas roadshows to promote the sale of a 10 per cent government stake in Indian Oil Corp (IOC) following stiff opposition from the Petroleum Ministry, which cited poor market conditions. 'IOC roadshows have been deferred. They are not happening this month. We will see it next month,' a government official said.
The roadshows, planned to attract foreign investors for the disinvestment in IOC, were due to start in London on Thursday, followed by the US, Singapore, Hong Kong and Dubai next week. The Petroleum Ministry opposed the proposal, saying the country's crown jewels could not be sold at low prices. IOC shares have fallen about 45 per cent from their 52-week peak of Rs 375 on January 18. The shares rose 1.5 per cent to Rs 207.95 at the close on the BSE on Thursday.
The sale of 19.16 crore IOC shares at current prices would fetch about Rs 4,000 crore, equivalent to a 10th of this year's disinvestment target. The government held a 78.92 per cent stake in the country's largest oil refiner as of 30 June. The decision to postpone the roadshows followed a meeting at which Oil secretary Vivek Rae is believed to have asked Disinvestment secretary Ravi Mathur to defer the plan.
Hours before the meeting, Rae told reporters: 'We cannot... sell an IOC share at Rs 200. You have to balance out the need for mobilising Rs 40,000 crore from disinvestment along with the fact that you cannot sell your crown jewels at low prices.'
Citibank, HSBC and UBS Securities are among the five merchant bankers selected to manage the IOC share sale.
'Current share price of IOC, already undervalued, may not fetch the fair value in the prevailing uncertain environment and investors in all probability are likely to factor in huge discount in their assessment of share price,' IOC chairman R S Butola wrote to the oil ministry last week. IOC was of the 'strong view that the current timing of the disinvestment is not in the interest of all stakeholders.'
Butola said investors are concerned about uncertainties such as lack of a transparent subsidy-sharing mechanism, fluctuations in profitability and liquidity constraints.
The roadshows, planned to attract foreign investors for the disinvestment in IOC, were due to start in London on Thursday, followed by the US, Singapore, Hong Kong and Dubai next week. The Petroleum Ministry opposed the proposal, saying the country's crown jewels could not be sold at low prices. IOC shares have fallen about 45 per cent from their 52-week peak of Rs 375 on January 18. The shares rose 1.5 per cent to Rs 207.95 at the close on the BSE on Thursday.
The sale of 19.16 crore IOC shares at current prices would fetch about Rs 4,000 crore, equivalent to a 10th of this year's disinvestment target. The government held a 78.92 per cent stake in the country's largest oil refiner as of 30 June. The decision to postpone the roadshows followed a meeting at which Oil secretary Vivek Rae is believed to have asked Disinvestment secretary Ravi Mathur to defer the plan.
Hours before the meeting, Rae told reporters: 'We cannot... sell an IOC share at Rs 200. You have to balance out the need for mobilising Rs 40,000 crore from disinvestment along with the fact that you cannot sell your crown jewels at low prices.'
Citibank, HSBC and UBS Securities are among the five merchant bankers selected to manage the IOC share sale.
'Current share price of IOC, already undervalued, may not fetch the fair value in the prevailing uncertain environment and investors in all probability are likely to factor in huge discount in their assessment of share price,' IOC chairman R S Butola wrote to the oil ministry last week. IOC was of the 'strong view that the current timing of the disinvestment is not in the interest of all stakeholders.'
Butola said investors are concerned about uncertainties such as lack of a transparent subsidy-sharing mechanism, fluctuations in profitability and liquidity constraints.
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