Ministries' row delays merger of IBP-IOC

The Indian Oil Corporation-IBP Ltd merger will have to cross another hurdle as the government has asked the IOC to make a presentation to a committee of secretaries.

The presentation was seen as a way out of a deadlock between the finance and the petroleum ministry on the swap ratio.

The finance ministry had objected to the swap ratio since the government equity in IOC would decrease by about 1.9 per cent post-merger. At present, the government holds 82.03 per cent stake in IOC.

An IOC executive told Business Standard that the Cabinet had granted an in-principle approval to the merger, but the decision was yet to be conveyed to the company, despite it being taken about a fortnight ago.

Executives also said the swap ratio under the Companies Act did not require any government approval, but it was send to the Cabinet since the Union government was the biggest shareholder in IOC.

"Any decision of such nature by a public sector undertaking is conveyed to the stock market as being subject to the government approval. Therefore, the swap ratio can be changed without violating any norm," said an executive, adding that reworking of swap ratio would delay the merger by another six months.

The scrips of the two companies have behaved according to the swap ratio approved by the boards of the two companies. The companies had decided that IBP Ltd shareholders would get 125 IOC shares for every 100 shares held by them.