Six banks hired for IOC follow-on issue

State-owned Indian Oil Corp has hired six banks, including Merrill Lynch, Citigroup and ICICI Securities, to handle its follow-on public offers (FPO) planned for early next year.

The six book running lead managers were hired from a set of 18 banks which made presentations over the past three days, sources close in know of the development said.

Other banks hired were Morgan Stanley, SBI Capital and UBS.

The government has approved fresh equity issue of 10 per cent of existing paid-up capital by IOC. Along with this, the government also intends to disinvest 10 per cent of the pre- issue equity capital through follow-on or further public offers (FPO) in the domestic market.

The 18 banks called for persentations between November 14 to 16 included Credit Suisse Securities, Deutsche Bank AG, Edelweiss Capital, Enam Securities Ltd, Goldman Sachs, HSBC Securities and Capital Markets, IDBI Capital Market Services, IDFC Capital, JP Morgan, JM Financial, Kotak Mahindra Capital and RBS Equities.

The FPO is planned for first quarter of 2011 calendar year, the sources said, adding the government intends to raise about Rs 24,000 crore through 10 per cent stake sale in IOC and 5 per cent in Oil and Natural Gas Corp (ONGC).

The process for ONGC FPO is yet to start. The oil ministry is in the process appointing independent directors on IOC and ONGC boards to meet market regulator SEBI's listing requirement.

The two firms don't meet the Sebi norm of having half of their board strength made up of non-official or independent directors.

Post stake sale, the government's shareholding in ONGC will come down to 69.14 per cent from 74.14 per cent. In IOC, the twin divestment and stake sale would reduce the government holding from 78.92 per cent to 64.57 per cent.

According to the road map being prepared, IOC would be the first to be disinvested. It will first sell 10 per cent, or 24.27 crore equity shares. This would be accompanied by sale of 10 per cent government holding, amounting to 19 crore shares.

The sale of 5 per cent or 10.6 crore equity shares in ONGC will follow this.