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Indian Oil Corp’s $4.4 bn share sale on hold

Indian Oil Corp’s $4.4 bn share sale on hold
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First Published: Thu, Feb 10 2011. 05 10 PM IST
Updated: Thu, Feb 10 2011. 05 10 PM IST
New Delhi: Indian Oil Corp’s planned share sale of up to $4.4 billion will be delayed due to unfavourable market conditions and rising global crude oil prices, its chairman said on Thursday.
“We found in September-October, global oil prices started increasing, and inflation is also high. I don’t think it is feasible at this stage to think of an FPO (follow-on public offer),” IOC chairman S.V. Narasimhan said.
“There is no timeframe at the moment,” he said, adding the company is still awaiting government approval for the share sale.
The public issue, earlier planned for the first quarter of 2011, includes a 10% stake sale by the Indian government and an equal number of new shares by IOC.
IOC is India’s biggest refiner and oil retailing firm.
The sale is part of a government plan to sell stakes in about 60 state-run firms to cut high fiscal deficit and garner funds to spend on schemes for the poor.
State-run explorer Oil and Natural Gas Corp and Steel Authority of India Ltd are also planning share sales by March-end.
IOC aims to raise $4.4 billion in January through the sale, its former chairman had said in December.
“When the share sale process started investor sentiment was positive on hopes that deregulation process will continue, and this was reflected in oil companies’ stocks,” he said on Thursday.
Deregulation of diesel, cooking gas and kerosene prices has not occurred yet, causing a nearly 46% decline in IOC shares from their peak in September 2010.
The federal government sets the retail price of diesel, cooking gas and kerosene at a lower rate to help poor and rein in inflation.
New Delhi has said it wants to loosen control of fuel prices, but has found this difficult after global crude rose 14% in the fiscal third quarter.
India deregulated petrol prices in June 2010 and since then state-run retailers have tried to keep pace with soaring international oil prices, which are now more than $100 per barrel.
State-run fuel retailers -- IOC, Bharat Petroleum Corp and Hindustan Petroleum Corp -- last raised petrol prices in mid-January and before that in late December 2010 when they rose 5.6%, the highest since June .
IOC, India’s biggest refiner with a total capacity of 1.294 million barrels per day (bpd), on Thursday said its third-quarter net profit rose to Rs 1635 crore from Rs 697 crore a year earlier.
Net sales rose 16% to Rs 75463 crore.
However, IOC is currently incurring revenue loss of Rs 190 crore a day on fuel sales, its head S. V. Narasimhan said on Thursday.
IOC posted gross refining margins of $6.33 a barrel in the December quarter, compared to $3.64/barrel a year ago.
IOC’s naphtha exports may decline by up to 1.2 million tonnes in the next fiscal from the estimated 2.5 million tonnes of this year as its Panipat naphtha cracker, which was shut in September is now operating at 80-90 percent capacity.
Shares in IOC closed down 0.5% to Rs 312.80 in the Bombay Stock Exchange.
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First Published: Thu, Feb 10 2011. 05 10 PM IST