Govt says ONGC FPO on schedule

‘Kick-off’ meet on Monday.

With disinvestment of five per cent equity in Oil and Natural Gas Corporation (ONGC) crucial for the government to meet its disinvestment target of Rs 40,000 crore for 2010-11, the process for a follow-on issue (FPO) will begin with a meeting of relevant ministries, investment bankers and legal advisors on Monday.

“We will have a ‘kick-off’ meeting on January 24. It will be attended by the department of disinvestment, the petroleum ministry, company officials, bankers to the issue and legal advisors,” disinvestment secretary Sumit Bose told Business Standard.

He said the FPO of Steel Authority of India Ltd would also take place during the current financial year.

The Union cabinet had on December 1 approved sale of a five per cent government stake in ONGC, the nation’s largest profit company, to raise up to Rs 13,000 crore. Petroleum secretary S Sundareshan told reporters the FPO was proceeding according to the plan, of taking place before the end of March.

Sundareshan said merchant bankers for the issue had already been appointed and progress on the FPO was as planned. Earlier this week, the government had appointed Bank of America Corp, Nomura Holdings, HSBC Holdings Plc, JM Financial Services, Citigroup Inc and Morgan Stanley to handle the FPO.

After the offer, the government shareholding in ONGC would come down to 69.14 per cent from the current 74.14 per cent. Officials said the Red Herring Prospectus for the FPO would be filed around mid-February, before which five more independent directors on the board of ONGC would be appointed to meet listing requirement of the Securities and Exchange Board of India (Sebi).

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

Besides, four independent directors at present; it needs five more to meet Sebi rules.

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.