Govt appoints 3 independent directors on ONGC board

The government has appointed three independent directors on the board of Oil and Natural Gas Corporation (ONGC), paving the way for sale of shares in the state-owned firm.

"The approval of the Competent Authority for appointment of former RBI Deputy Governor Usha Thorat, former Finance Secretary Arun Ramanathan and Deepak Nayyar, ex-vice chancellor of the Delhi University as independent or non-executive directors on the ONGC board has been received," an Oil Ministry official said.

With this, ONGC now meets market regulator Sebi's listing requirement of having equal number of executive and non-executive directors, paving the way for the follow-on public offer (FPO).

"The timing of the public offer will however be decided by the Department of Disinvestment [DoD)]" he said.

The public offer in which the government plans to sell 5% (427.77 million shares) was scheduled to open on July 5 and close on July 8.

"To keep those timelines, three independent directors needed to fulfill Sebi's listing requirement should have been appointed by June 14,"he said, adding the delay in appointment meant that the FPO will be pushed back by at least one week.

After the appointments are made, ONGC will need 3 full working days to prepare papers for filling with the market regulator. As per the July 5 timeline, ONGC was supposed to file red herring prospectus (RHP) for the FPO by June 17 and roadshows to promote it were to start soon after that.

"The roadshows have been postponed," the official said.

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 to meet the market regulator Sebi's listing norm.

The company has planned to launch the FPO on July 5 but will have to be deferred again over 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. Against this, it currently has five independent directors and needs four more to meet the Sebi's listing norm.

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

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

ONGC in February 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 Plc, JM Financial Services, Citigroup Inc and Morgan Stanley are managing the FPO.