IOC to use oil bonds to raise funds

Last year, IOC had invested Rs 2,320 cr worth of bonds and raised Rs 1,800-Rs 2,000 cr.

Indian Oil Corporation is in talks with the Clearing Corporation of India for leveraging a portion of the Rs 6,500 crore bonds issued to it by the government for raising additional resources.

"We are talking to them to use Rs 1,000 crore worth of our oil bonds as collateral to raise further funds in the call money market," S V Narsimhan, director (finance), told Business Standard.

The company will use the Collateralised Borrowing and Lending Obligation (CBLO) instrument offered by the Clearing Corporation of India Ltd, which would help it to reduce the borro-wing cost.

Companies were earlier not allowed to access the call money market directly. But with CBLO introduced last year, companies can become members and pledge government securities against their borrowing limits. It requires members to open an account with Clearing Corporation of India for depositing securities which are offered as collateral.

The government recently allocated bonds worth Rs 11,500 crore to oil marketing companies to tide over the under-recoveries suffered by them on account of selling petroleum products below cost prices.

While Indian Oil was allocated bonds amounting to Rs 6,898 crore, Hindustan Petroleum and Bharat Petroleum got bonds worth Rs 2,400 crore and Rs 2,200 crore respectively.

In March itself, Indian Oil suffered an under-recovery of Rs 1,700 crore and this was expected to go up further, Narsimhan said.

On whether new bonds would have takers in open markets without a Statutory Liquidity Ratio status, he said the company did not expect lack of investors. "With over 7 per cent average return, it is still a lucrative instrument to invest in," Narsimhan pointed out.

This is the second time that Indian Oil is entering the call money market. Last year, the company invested Rs 2,320 crore worth of bonds and raised Rs 1,800-Rs 2,000 crore, he said.

This was Indian Oil's share from the Rs 5,762 crore worth of bonds issued to oil companies in order to liquidate the balance payable to these firms from the Oil Pool Account (which was wound up in 2002 following dismantling of the administered price regime).