Govt seeks to rework IOC, IBP swap ratio

Proposes that IBP shareholders should get 110 IOC shares for every 100 held.

The government has decided to ask the boards of state-owned Indian Oil Corporation (IOC) and its subsidiary IBP Ltd to rework the proposed swap ratio for their merger.

A committee of secretaries headed by Cabinet Secretary BK Chaturvedi, last week asked the companies to consider a swap ratio of 1:1.1, which translates into IBP shareholders getting 110 IOC shares for every 100 shares held by them.

In December 2004, the boards of directors of the two companies had approved a ratio of 1:1.25 but the government "" the owner of IOC "" had objected to it.

When contacted, an IOC spokesperson refused to comment and said that the company was yet to hear from the government. Petroleum Secretary SC Tripathi confirmed that the government had directed the boards to "consider certain parameters" for reworking the swap ratio. He did not comment on the change sought, citing market sensitivities.

IBP, with about a 10 per cent share in the diesel market and a little over 8 per cent share in petrol, is the smallest company in the oil retailing business in India. IOC with 40 per cent and 35.5 per cent shares in diesel and petrol sales, respectively, is the largest firm in the retail business.

The finance ministry had objected to the 1:1.25 swap ratio because it would have shrunk the government equity in IOC by less than 1 per cent.

At present, the government holds 82.03 per cent in IOC.

IOC holds 53.58 per cent in IBP, while 12.21 per cent is held by institutional investors and 34.21 per cent by the public. IOC had bought the government's 33.58 per cent equity in IBP in 2002 and bought another 20 per cent through an open offer. The government later sold another 26 per cent through a public offer.

After the merger, IOC's paid-up capital will rise to Rs 1,196 crore from Rs 1,168 crore. The 11.87 million IBP shares held by IOC will now be transferred to a trust.