Govt advances ONGC's FPO to March

The government has advanved the follow-on public offering of Oil and Natural Gas Corp (ONGC) to March 2011, while pushing back the share sale of Indian Oil Corp (IOC) to the next fiscal.

"The FPO of ONGC will happen before end of March 2011," Oil Secretary S Sundareshan told at a news conference here.

The Cabinet had on December 1 approved sale of government's 5 per cent stake in ONGC, the nation's highest profit earning firm, to raise up to Rs 13,000 crore.

The share offering of IOC, which previously was said to happen in the third or fourth week of January, would now happen next fiscal.

"As far as IOC FPO is concerned, there was no decision (of the Cabinet) for the share offering," he said. "The department of disinvestment says only one issue from the oil sector can take place this fiscal and that will be ONGC."

The Cabinet has not yet approved sale of its 10 per cent shareholding in IOC that at current market price would fetch close to Rs 9,000 crore. IOC has already appointed six merchant bankers for the FPO, which was to be clubbed with a similar size offering to raise funds for company's expansion plans.

"The rise in crude oil prices to USD 90 per barrel has made IOC less attractive to investors as it does not have freedom to sell auto and cooking fuel at market rates. The firming up of international oil prices means that it will lose more money on fuel sales as difference between domestic retail price and imported cost widens," a source said.

On the other hand, ONGC has become attractive as the company gets international price for the crude oil it produces.

"Merchant bankers for the ONGC FPO will be appointed in January, while the red herring prospectus that will incorporate financial details of the first three quarters, will be filed by January-end," another source said.

Post offer, the government shareholding in ONGC would come down to 69.14 per cent from current 74.14 per cent.

As a precursor to the share sale, ONGC will split equity shares with a face value of Rs 10 each into two shares of Rs 5 each. It will also issue a 1:1 bonus -- one free share for every existing equity held by shareholders.

After the share split and bonus issue, the market value of ONGC's shares will dip to around Rs 324, as against today's closing price of Rs 1,294 on the Bombay Stock Exchange and it is expected this will be an attractive level for retail investors to subscribe to the company.

The government plans to raise Rs 40,000 crore through disinvestment of its minority stake in public sector units in the current fiscal, up from around Rs 25,000 crore in 2009-10.