Govt invites merchant bankers for ONGC FPO

The government today invited applications to appoint merchant bankers for advising it on the timing and other aspects of the proposed ONGC's Rs 13,500 crore public offer which is being targeted to hit the market in March.

"Proposals are invited, from reputed merchant bankers, either singly or as a consortium, with experience and expertise in public offering in capital market to act as a book running lead managers (BRLMs) and to assist and advise the government in the process," the finance ministry said in a public statement.

The government plans to sell 5 per cent of its stake in Oil and Natural Gas Corp through the further or follow-on public offering (FPO) which at current prices can fetch up to Rs 13,500 crore.

Interested parties can submit their proposals to the government by January 14, 2011.

According to an official, the short-listed merchant bankers would be called for presentations on January 15 and 16 and six BRMLs for the FPO would be appointed the following day.

Legal advisors would be called for presentations on January 18 and would be engaged the next day.

The red herring prospectus (RHP) for the FPO would be filed around mid-February, before which five more independent directors on the board of ONGC will be appointed to meet market regulator SEBI's listing requirement.

ONGC has six functional directors besides chairman and managing director. It also has two government appointed nominee directors taking the total strength to nine.

Besides, the company currently has four independent directors and it needs five more to meet the SEBI's listing requirements.

"The FPO will hit the market in March. We will decide on the dates closer to the issue. We have deliberately kept flexibility to get maximum," the official 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 free share to every shareholder.

After the share split and bonus issue, the market value of ONGC's shares will dip to around Rs 323, as against today's trading price of Rs 1,275 on the Bombay Stock Exchange and it is expected this will be an attractive level for retail investors to subscribe to the company.

ONGC has already appointed two international auditors -- DeGolyer and MacNaughton and Gaffney, Cline and Associates -- to certify itself and its subsidiary ONGC Videsh Ltd's oil and gas reserves, a prerequisite for any exploration firm going for a public offering.

The official said the reserve certification would come by this month or early January.

The company, which usually gets its reserves audited in every five years, is getting certification done after just a three-year gap this time because of the planned FPO.