IOC, ONGC public offers unlikely this year

The government's plans of raising Rs 12,000 crore during the current fiscal through divestment of its 20 per cent stake in Indian Oil Corporation (IOC) and 5 per cent in Oil and Natural Gas Corporation (ONGC) may remain a non-starter because of paucity of time.

This could be the reason the high-level meeting among senior officials of the finance, petroleum and disinvestment ministries yesterday did not discuss this option to raise funds for meeting the budgetary deficit during the current fiscal.

Instead, the meeting discussed the possibility of asking public sector oil companies to give a hefty interim dividend during the year.

Moreover, a meeting between Petroleum Secretary B K Chaturvedi and Disinvestment Secretary Dhirendra Singh to discuss the modalities of market offering of the government's equity in Indian Oil and ONGC did not take place today.

Petroleum ministry officials point out that firstly, the divestment proposal has to be cleared by the Cabinet Committee on Disinvestment (CCD).

The CCD may not meet till after the forthcoming elections to five state assemblies due early next month.

This would leave the government with barely four months to hit the market with the IPOs of the two blue-chip companies.

However, the officials say that it would require the mandatory three months to make preparations like appointment of advisors and managers for the domestic float which would take it very close to the year-end.

Even there, it may not be possible to go to the market with a float of around Rs 12,000 crore, the biggest so far, since at the same time, the government may be offering its residual stake in Indian Petrochemicals Corporation Limited (IPCL) and IBP Company Limited for which it has already got Cabinet approval. The IPCL and IBP floats are expected to fetch the government around Rs 3,000 crore.

The government has already been informed by merchant bankers that the domestic market would not be able to absorb this size of divestment in one go.

They have pointed out that though Gail's float two years ago was of the size of a mere Rs 900 crore, still it was felt that the government did not get the right price for its stake.

It has also been pointed out to the government that it would not be possible to go it for an ADR or GDR issue at such a short notice.

For the ADR issue, the government will have to refigure their accounts as per the stringent General Accounts and Auditing Practices (GAAP) applicable to all ADR floats which takes long. A somewhat similar was the case with the GDR issue.