State-owned Oil and Natural Gas Corporation's (ONGC) Rs 11,500 crore share sale is likely to be deferred for the third time as government failed to keep timelines for appointment of independent directors on the company board.
The public offer in which government plans to sell 5% (427.77 million shares) was scheduled to open on July 5 and close on July 8.
"To keep those timelines, three independent directors needed to fulfil Sebi's listing requirement should have been appointed by June 14," a senior government official said.
After the appointments are made, ONGC will need three full working days to prepare papers for filling with the market regulator. As per the July 5 timeline, ONGC was supposed to file red herring prospectus (RHP) for the follow-on public offer (FPO) by Friday (June 17) and roadshows to promote the public offer was to star soon after that.
"The file for appointment of three independent directors on ONGC board is with the Prime Minister's Office. We haven't heard from the PMO till now," the official said.
The share sale was originally planned to happen in 2010-11 but was deferred to April 5 as the company did not have adequate number of independent directors on its board to meet the market regulator Sebi's listing norm.
It then listed for July 5 but will have to be deferred again over the same reason.
ONGC does not meet Sebi's listing norm of having an equal number of functional and independent directors and the government had previously planned to withdraw both its nominee directors on the board to push the FPO through.
But the move would have led to ONGC losing its coveted Navaratna status, which gives the company board autonomy to approve an investment of any size on its projects and powers to invest up to Rs 1,000 crore in a joint venture company.
According to the norms, a Navaratna board can exercise its limitless powers only when it has government-nominated directors on board. Upon withdrawal of such directors, ONGC would have to seek nod of the Public Investment Board (PIB) for any spending of over Rs 100 crore, the official said.
"The consequences of withdrawing government directors were too grave and so it has been decided to make regular appointment of independent directors and till such time, the FPO was deferred," he said.
Former RBI Deputy Governor Usha Thorat and former Finance Secretary Arun Ramanathan and Deepak Nayyar, ex-vice chancellor of the Delhi University, are being appointed as independent or non-executive directors on the ONGC board.
"The three names are with the Cabinet Committee on Appointments and their appointment has not yet been confirmed," the official said.
ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. Against this, it currently has five independent directors and needs four more to meet the Sebi's listing norm.
But since the company does not have a full-time chairman and director (human resources), appointment of three directors would help ONGC meet Sebi norm, the official said.
Post-FPO, the government's stake in ONGC would come down to 69.14% from the current 74.14%.
ONGC in February received the report of independent auditors, who certified the company's oil and gas reserves, a mandatory requirement for explorers making public offers.
Bank of America Corp, Nomura Holdings, HSBC Holdings Plc, JM Financial Services, Citigroup Inc and Morgan Stanley are managing the FPO.
