ONGC board approves papers for proposed FPO

The Board of Oil and Natural Gas Corp (ONGC) has approved the red herring prospectus (RHP) for a proposed Rs 11,500 crore share sale, but is still awaiting the Department of Disinvestment's (DoD) nod for filing papers with Sebi.

The full board of ONGC, including three newly appointed independent directors, yesterday approved the RHP, an official said here today.

"We are ready. Whenever DoD tells us, we will file the prospectus with Sebi," he said. "The FPO will hit the market in three weeks from the filing of RHP."

The government is selling 5%, or 427.77 million shares, through a follow-on public offer and ONGC is assisting in the sale. "The call on when the FPO has to be launched will have to be taken by the government," he said.

The official said the government earlier this month appointed three independent directors, including former RBI Deputy Governor Usha Thorat, on the board of ONGC, paving the way for the sale of shares in the state-owned firm.

The other independent directors appointed to the ONGC board include Prof Deepak Nayyar (ex-Vice Chancellor of the Delhi University) and former Finance Secretary Arun Ramanathan.

The appointment meant that ONGC now conforms to market regulator Sebi's listing requirement of having an equal number of executive and non-executive directors.

The share sale was originally planned to happen in 2010-11, but was deferred to April 5 as the company did not have adequate number of independent directors on its board. The FPO was then planned to be launched on July 5, but was deferred due to the same reason.

ONGC has six functional directors, besides the chairman. It also has two government-appointed nominee directors, taking the total strength of functional/promoter directors to nine. In comparison, it has five independent directors and needs four more to meet Sebi's listing norm.

But since the company does not have a full-time chairman and director (human resources), the appointment of three directors would help ONGC meet Sebi's norm, the official said.

Post-FPO, the government's stake in ONGC would come down to 69.14% from the existing 74.14%.

ONGC in February had received the report of independent auditors, who certified the company's oil and gas reserves, a mandatory requirement for explorers making public offers.

Bank of America Corp, Nomura Holdings, HSBC Holdings, JM Financial Services, Citigroup and Morgan Stanley are managing the FPO.