New Delhi: State-run Oil India Ltd (OIL) plans to raise $900 million (around 5,400 crore) to finance the purchase of Videocon Mauritius Energy Ltd’s 10% stake in Mozambique’s Rovuma 1 offshore block.

The company plans to shortly start communicating with around 20 banks such as Citigroup Inc., Barclays, HSBC and Deutsche Bank among others, said a senior OIL executive who spoke on condition of anonymity.

OIL and ONGC Videsh Ltd (OVL) are together acquiring Videocon’s stake for $2.47 billion.

“The acquisition is expected to be implemented via a newly incorporated entity, in which OVL and OIL are expected to hold 60% stake and 40% stake, respectively," Oil and Natural Gas Corp. Ltd, parent of OVL, said in a statement dated 25 June.

ONGC is yet to firm up the funding plans for its $1.48 billion contribution.

“Once the transaction is complete, we will take a call," said ONGC finance director A.K. Banerjee.

The transaction is expected to close in the fourth quarter of 2013.

“There are a number of options. They (OVL) can go to the market for loans with our back-up, or they can take money from us or we can borrow from the market for them. It (the money) wouldn’t be a problem," Banerjee added.

The Rovuma Area 1 deepwater block is said to be the largest gas discovery off Africa’s east coast with estimated recoverable reserves of 35 to 65 trillion cu. ft (tcf).

US-based Anadarko Petroleum Corp. is the operator in the project. Other partners include India’s state-run Bharat Petroleum Corp. Ltd (BPCL), Empresa Nacional de Hidrocarbonetos (ENH) of Mozambique, Mitsui and Co. Ltd of Japan and PTT Exploration and Production Public Co. Ltd (PTTEP) of Thailand.

“Everything has been done from our side. The partners have the pre-emptive rights," said a petroleum ministry official, requesting anonymity.

An earlier attempt by OVL to buy ConocoPhillips’ 8.4% stake in Kazakhstan’s Kashagan offshore oil field was scuttled by China with the Kazakhstan government exercising its rights to buy the shares on offer.

Countries such as India that are dependent on imports to meet their oil needs are particularly vulnerable to supply shocks. India is therefore seeking to build up energy assets worldwide.

The Rovuma block area covers 2.6 million acres. If their acquisition is successful, the two Indian state-owned firms will have a 10% stake in the block.

While Andarko has a 36.5% stake in the block, BPCL, ENH, Mitsui and PTTEP have a stake of 10%, 15%, 20% and 8.5%, respectively.

Meanwhile, as part of its quest to get a partner for its block in the KG basin off India’s east coast, ONGC is in talks with ConocoPhillips and Shell, Banerjee added. ONGC has been scouting for a partner after Norway’s Statoil ASA and Brazil’s Petroleo Brasileiro SA exited the block.

In a separate development, ONGC on Monday said its net profit for the three months to 30 June fell 34% to 4,016 crore on account of its subsidy burden—for supplying crude at a discount to state-run oil marketing companies—increasing to 12,622 crore.

The public sector unit also registered a 4.3% drop in revenue for the quarter to 19,283 crore from 20,149 crore in the year-ago period due to fall in crude oil prices, increase in operating expenditure, surveys and an impairment to the tune of 335 crore, Banerjee said.

ONGC’s gross and net realization per barrel of crude was $102.90 and $40.17 per barrel, respectively as compared to $109.18 and $45.91 per barrel in the year ago period. The impact on net profit due to supplying crude at a discount was 7,131 crore.

ONGC chairman and managing director Sudhir Vasudeva said that the company set aside 1,100 crore for a post- retirement benefit scheme for its employees.

“ONGC’s 1QFY2014 net profit was below our and street expectations on account of higher than expected subsidy. Its net sales decreased 4.3% y-o-y (year-on-year) to 19,218cr on account of higher subsidy burden in our view. The company shared a subsidy burden of 12,622cr in 1QFY2014, compared to 12,346cr in 1QFY2013 and 12,312cr in 4QFY2013," Bhavesh Chauhan, an analyst at Angel Broking, said in a note to clients.

Shares of ONGC rose 1.67% to close at 277.65 on BSE on Monday. The exchange’s benchmark Sensex rose 0.84% to 18,946.98 points.

Close