IOC to sell ONGC shares only in phases

Stake-sale proceeds to be used for overseas acquisitions.

Indian Oil Corporation (IOC) will use the proceeds from the sale of its stake in ONGC for overseas acquisitions of mid-sized exploration and production companies.

However, IOC's 9.6 per cent stake in ONGC will not be sold back to the exploration major at one go. IOC will sell the stake in phases to coincide with its own investment plans.

"We are considering to sell ONGC's shares to unlock value. However, we will sell them only in phases so that it coincides with our investment and acquisition plans," MS Ramachandran, IOC chairman and managing director, said on the sidelines of Lakshya '04, organised by the National Institute of Industrial Engineering (NITIE), in Mumbai today.

ONGC intends to buy back its cross holdings in IOC and GAIL India for which it has amended its articles of association. At the current rate, ONGC will have to shell out Rs 11,035.35 crore (the ONGC stock closed at Rs 805.50 on Bombay Stock Exchange today) to buy back 13.7 crore shares issued in 1998 to IOC.

IOC had acquired these shares for Rs 1,617 crore. "It is a trade off, whether go in for raising more debt or a conservative debt:equity ratio," Ramachandran said.

At present, IOC's debt:equity ratio is 0.6:1. IOC would need investments in its future expansion of petrochemical plants in the country, Ramachandran added.

It has already drawn up a Rs 25,000 crore investment plan for petrochemical project, which include an integrated paraxylene/purified terephthalic acid plant at Paradip and also another petrochemical plant at Paradip, which will entail investments to the tune of Rs 19,000 crore.

At Paradip, IOC is toying with the idea of setting up the petrochemical unit adjacent to the 9 million tonnes petroleum refinery.

"This will be similar to Reliance's refinery at Jamnagar. The petroleum refinery along with world-class petrochemical unit is more viable," Ramachandran elaborated.

Chennai Petroleum Corporation, IOC's subsidiary, is also preparing a feasibility report for setting up a polypropylene unit at the Manali refinery.

Moreover, it is also planning to expand upstream activities by acquiring mid-sized exploration and production company. It is scouting for exploration and production units in Africa and Central Asia, he added.