ONGC not in a hurry to offload stake in IOC, GAIL2 min read . Updated: 02 Oct 2018, 02:46 PM IST
ONGC holds 13.77% stake in oil refiner IOC and 4.86% in gas utility GAIL India
New Delhi: State-owned Oil and Natural Gas Corp (ONGC) is not in a hurry to sell its stake in Indian Oil Corp and GAIL (India) and will wait for the right price before offloading the shares, a senior company official said.
ONGC holds 13.77% stake in oil refiner IOC and 4.86% in gas utility GAIL India.
“It is true that we are now a fully integrated company. We are India’s largest oil and gas producer and the acquisition of (oil refiner) HPCL has extended our presence in the downstream industries. “And so naturally, it now does not make sense for ONGC to hold stake in Indian Oil Corp (IOC). But, we will wait for the right price," said the official.
ONGC, he said, got over ₹ 3,000 crore in dividend income from investments in IOC and GAIL in 2017-18 financial year.
“This is a decent return on capital and can help me hold on to shares for long," he said. “I am in no hurry to sell the stake. We will wait for the right price."ONGC’s 13.77% stake in IOC at Monday’s closing price of ₹ 153.80 apiece on BSE is worth over ₹ 20,500 crore. Its 4.86% stake in GAIL is worth close to ₹ 4,200 crore at Monday’s closing price of ₹ 380.75.
“IOC shares were trading at around ₹ 195 in January and are now at ₹ 153-154. It doesn’t make sense to sell the shares at such a big loss," the official said.
ONGC, he said, is generating enough surplus mainly because of international oil prices spiking to four-year high and the rupee plummeting to an all-time low.
It is using these to pay off ₹ 24,881 crore loan it had taken to buy Hindustan Petroleum Corp Ltd (HPCL) for ₹ 36,915 crore.
A third of the loan has already been pre-paid, he said.
ONGC had borrowed ₹ 24,881 crore on a short-term loan to fund buying of the government’s 51.11% stake in HPCL. The remaining came from its cash reserves.
The official said the pace of repayment may slow down in the third and fourth quarters owing to outgo on taxes and dividend as also the fact that capital spending would peak by then.
Initially, ONGC considered selling its stake in IOC and GAIL to fund the acquisition, but it has never found the right price to offload the shares, he said.
The short-term loan ONGC availed had a provision to prepay without any penalty.
ONGC had held talks with Life Insurance Corporation of India (LIC) for selling IOC and GAIL shares but the state-owned insurer insisted on buying them at 10% discount to the prevailing price. ONGC thus decided against the share sale.
ONGC’s purchase of HPCL created India’s first integrated oil company. This was ONGC’s biggest acquisition and second buyout of 2017-18 after its ₹ 7,738 crore acquisition of 80% stake in Gujarat State Petroleum Corp’s KG basin gas block.
HPCL added 23.8 million tonne of annual oil refining capacity to ONGC’s portfolio, making it the third largest refiner in the country after IOC and Reliance Industries.
ONGC already is majority owner of Mangalore Refinery and Petrochemicals, which has a 15-million tonne refinery.
This story has been published from a wire agency feed without modifications to the text.