Oil firms step back on sale of cross-holdings

ONGC & IOC would prefer to buy back its shares.

Oil and Natural Gas Corporation and Indian Oil Corporation are against immediate sale of their cross-holdings. Flush with funds, ONGC, instead, would prefer to buy back its shares, a senior company executive said.

He added that it was not the appropriate time for offloading ONGC shares by IOC. The government had sold 10 per cent equity in March. "Any fresh float in the market will create an overhang," the executive added.

An IOC executive said though the company had earlier sought government permission to sell the ONGC equity, it was now of the opinion that market conditions would not fetch a high price at this point of time.

ONGC has offered to buy back its equity held by Gail India and IOC at market rates. Securities and Exchange Board of India (Sebi) norms stipulate that the buyback price be the 15 days' average price and the last six months' average, whichever is higher. "This would also increase returns to investors," said the executive.

The government wanted IOC to sell half of its 13.7 million shares in ONGC in the domestic market and dispose of the remaining 4.8 per cent to international investors. It also wanted ONGC to sell its 9.1 per cent holding in IOC in the domestic market.

ONGC is expected to realise Rs 4,000-5,000 crore through the sale of IOC shares but the company, which has seen its profits soar to Rs 5,692 crore during April-September, 2004, does not see the need to raise money.

"We are making Rs 10,000 crore from our domestic operations and Rs 5,000 crore from overseas operations," he said.

The government, which had set a revenue target of Rs 4,000 crore from disinvestment for the current year, is looking at the various options for selling its equity in public sector companies.

This can be achieved through sale of a 26 per cent stake in Oil India Ltd to IOC, which is getting into the exploration business but officials said the task might not be easy since it was a sensitive issue with the North-East.

IOC and Oil India Ltd have recently signed a memorandum of understanding for jointly undertaking upstream activities.

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Plan A

What IOC proposed

Sell 4.8% ONGC shares in the domestic market

List the remaining 4.8% in its kitty on the NYSE

Expected Rs 10,000 crore from the sale

What ONGC proposed

Sell 9.1% IOC stake in domestic markets

Expected Rs 4,000-5000 crore from the sale