ONGC wants to buy back IOC's share in company

IOC holds 9.6% equity in ONGC, to use sale proceeds to fund foreign buyouts.

The Oil & Natural Gas Corporation Chairman and Managing Director Subir Raha today said the company would like to buyback its shares from the Indian Oil Corporation.

IndianOil holds a 9.6 per cent stake in the ONGC and 4.8 per cent in the GAIL (India) Ltd. Raha has ruled out selling its 9.1 per cent equity in the IndianOil. The ONGC also holds 4.8 per cent equity in the GAIL, while the GAIL holds 2.4 per cent equity in the ONGC.

On Thursday, the government allowed the IndianOil, ONGC and the GAIL (India) Ltd to sell their cross-holdings which are valued at around Rs 25,000 crore. The companies have been advised to first explore the possibility of a swap deal.

On the other hand, IndianOil Corporation said that it will evaluate if it needed to sell its equity in the Oil & Natural Gas Corporation during the current financial year or borrow against the oil bonds that are proposed to be issued by the government.

"We can raise debt at 6-7 per cent interest rate. We will evaluate the dividend yield to decide whether we should sell the ONGC equity or borrow," IndianOil Director (Finance) SV Narasimham told the Business Standard.

The IndianOil's borrowings have reached Rs 24,000 crore and the company may restrict its borrowings through the sale of a small tranche of the ONGC shares, he added.

IndianOil intended to sell its stake in the ONGC and the GAIL to meet its capital expenditure requirements in the wake of under-recoveries on the sale of petroleum products.

The under-recoveries had, however, decreased over the last fortnight due to a fall in international oil prices. The company has suffered gross under-recoveries of Rs 8,500 crore till November 15 on the sale of petrol, diesel, LPG and kerosene.

IndianOil planned to use the sale proceeds to fund its overseas acquisitions.

The company wants to buy into a mid-sized exploration company besides getting into retailing of petroleum products in other countries through purchase of equity in a downstream company.