IOC disinvestment likely by December 10

Low valuation concerns remain; overseas investors lukewarm

The finance ministry is likely to go ahead with the disinvestment of Indian Oil Corporation (IOC) by December 10, despite a lukewarm response from overseas investors and shares touching an all-time low.

 IndianOil share prices have dropped down close to 50 per cent since it was first conceptualised in 2010. While the Dubai roadshow was cancelled, no big investors from Hong Kong and Singapore or the United States showed interest in the roadshows. The offer for sale is likely to be at a discounted price of around Rs 190 a share.

The ministry of petroleum and natural gas and the IndianOil management had approached the finance ministry twice, asking to put the offer on hold till the share prices revived. “We had given our inputs on the disinvestment in October. We believe prices are unduly depressed at this point of time,” R S Butola, IndianOil chairman, had told the media recently. However, the finance ministry was of the view that the divestment process has to go through because of tight fiscal situation as it was a bigger concern. The government wants to wrap up the share sale before the year-end holiday season.

According to sources close to the development, a majority of the huge funds — like JPMorgan, Templeton, T Rowe Price, Wellington Management, Aberdeen Asset Management and Schroders  — refused to meet the IOC team or did not show any interests.

“At a discounted price of around Rs 190 a share, IOC may fetch only around Rs 3,800 crore. There are still worries around export parity pricing and subsidy issues. However, this pricing would be good for investors as downside from this level is unlikely,” said Emkay Global Financial Services’ Dhaval Joshi.

IOC’s share prices were around Rs 400 per share, when the divestment process was initiated in 2010, which came down to Rs 201.05 on Tuesday, down 2.28 per cent from the previous close.  The 52-week high of the shares was at Rs 375 in January, while it plunged to Rs 186.20 in July.

Net profit dropped to Rs 1,684 crore during the July-September quarter from Rs 9,611 crore in the year-ago period. During H1, it suffered a loss of Rs 3,000 crore.