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ONGC plans to raise $4 billion to fund projects of subsidiaries

ONGC plans to raise $4 billion to fund projects of subsidiaries
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First Published: Thu, Apr 09 2009. 10 21 PM IST

Borrowing plan: ONGC chairman and managing director R S Sharma. Harikrishna Katragadda / Mint
Borrowing plan: ONGC chairman and managing director R S Sharma. Harikrishna Katragadda / Mint
Updated: Thu, Apr 09 2009. 10 21 PM IST
New Delhi: India’s largest energy explorer, Oil and Natural Gas Corp. Ltd (ONGC), plans to borrow as much as Rs20,000 crore ($4 billion) to fund projects by its units as a global recession and slowing inflation lower the cost of credit.
The loans include Rs8,800 crore to be raised in the next two to three months for a planned chemical venture in Gujarat, chairman and managing director R.S. Sharma said by phone in New Delhi on Thursday.
Borrowing plan: ONGC chairman and managing director R S Sharma. Harikrishna Katragadda / Mint
ONGC’s borrowing plan comes after crude prices declined more than 65% from a July record, lowering the selling price of the explorer’s oil. The Reserve Bank of India (RBI) has cut the benchmark interest rate five times since October to protect the country from the deepening global recession.
“ONGC can get loans at cheap rates as it doesn’t have too much debt on its books and its servicing ability is good,” said Deepak Pareek, an analyst at Mumbai-based Angel Broking Ltd. “The monetary easing will make it easier to access loans.”
Pareek, the top-ranked analyst for ONGC according to data compiled by Bloomberg, rates the stock a buy.
The money raised will be used in projects worth around Rs30,000 crore, Sharma said. These include a power plant in Tripura and the expansion of a refinery operated by unit Mangalore Refinery and Petrochemicals Ltd in Karnataka.
“We hope to raise the remaining funds in a phased manner over the next year or so,” Sharma said. “Banks have already committed to lend us the money we require.” He didn’t specify if the money will be raised from domestic or overseas banks.
The loan for the chemical venture will be raised locally, D.K. Sarraf, ONGC’s director of finance, said on Thursday. The company had cash and bank balances of around Rs13,000 crore as of 31 March, he said.
ONGC declined 2.3% to Rs884.5 in Mumbai trading, ending a four-day winning streak. The benchmark Sensex climbed 0.6% for the sixth straight day of gains.
ONGC and partner Gujarat State Petroleum Corp., a state government-owned explorer, plan to spend Rs12,400 crore to set up the chemical plant at Dahej, which is scheduled to start production by 2012.
GAIL India Ltd, the nation’s largest gas distributor, will be offered a 19% stake in the venture, known as ONGC Petro-Additions Ltd.
The borrowing plan excludes $1 billion raised in January by ONGC Videsh Ltd, a unit of the state-owned explorer, to fund the acquisition of Imperial Energy Plc.
New Delhi-based ONGC plans to spend Rs20,000 crore in the year that started 1 April, Sharma said. Around Rs8,000 crore will be spent on oil and gas exploration.
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First Published: Thu, Apr 09 2009. 10 21 PM IST
More Topics: ONGC | Oil | Gas | Funds | Loans |