Having achieved less than a fourth of its Rs 80,000 crore disinvestment target for the current fiscal so far, the Centre is now looking to sell shares in three leading oil public sector undertaking (PSUs) to narrow the gap. The government is considering a plan to sell shares worth $2 billion in Oil and Natural Gas Corp (ONGC), Indian Oil Corporation Ltd (IOCL) and Oil India Ltd (OIL), which would be in addition to the proceeds generated from a likely Rs 10,000-crore share buyback by these companies, reported the Economic Times.
Govt plans to sell shares worth $2 billion in ONGC, OIL, IOC
People aware of developments told the daily that the proposal envisages selling about 5% equity stake in ONGC, 3% in IOCL and 10% in OIL. The proposed stake in ONGC is currently worth about Rs 10,000 crore, with the stock falling 1.48% to Rs 156.55. The IOCL and OIL stake sales would have similarly generated Rs 4,178 crore and Rs 2,259 crore, respectively at current prices. So collectively, the planned stake sale can fetch the Centre close to Rs 16,500 crore if the share prices hold steady. However, the sources added that government is likely to offload these shares at a 5% discount to market rates.
If things go to plan, the government’s stake would fall to 62.48% in ONGC, 53.75% in IOCL and 56.13% in OIL. Of course, it could erode further if the government tenders its shares in the expected buybacks. But it is possible that the quantum of shares offered for sale changes by the time the government gets around to announcing it. The timing of the sale is reportedly still unclear but it could take place in a month or so, depending on investor sentiment and details of the buyback plans.
The respective boards of the PSUs are set to consider the buyback proposals, prompted by the government pushing them. They had initially resisted the move on the grounds that they didn’t have enough cash reserves and needed internal resources to fund their capex plans, but have reportedly now come round. OIL will consider the proposal on November 19, the company said in a regulatory filing. The exercise is likely to raise about Rs 1,100 crore, said sources, adding that ONGC will probably buy back shares worth Rs 4,800 crore and IOCL’s buyback could be about Rs 4,000 crore in size.
The fears of a dividend cut this year following the share repurchase also may not come to pass. The buzz is that the companies will have to at least match last financial year’s payout.
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