A day ahead of a ministerial panel meeting to decide on disinvestment in Indian Oil Corp (IOC), Petroleum Ministry today opposed stake sale in the nation's largest oil firm at current subdued prices.
At today's closing price of Rs 195.50, IOC has a market capitalisation of Rs 47,466 crore. This m-cap is after factoring in IOC's 7.69% holding in Oil and Natural Gas Corp (ONGC) worth Rs 17,9711.78 crore at today's closing price.
This leaves less than Rs 30,000 crore market value that is attributable to IOC. This is less than the investment that IOC is putting in setting up a 15 million tons refinery at Paradip in Odisha, the oil ministry feels.
Sources said the ministry put these views at an inter-ministerial group (IMG) of secretaries while opposing sale of 10% stake in IOC.
The IMG inputs will be put at tomorrow's meeting of the Empowered Group of Ministers (EGoM) headed by Finance Minister P Chidambaram, they said, adding the EGoM is to decide on the schedule of IOC disinvestment.
Moily has time and again said the IOC cannot be sold when the scrip is way lower than the 52-week peak of Rs 375 reached on January 18 last year.
Investors at promotional roadshows in the US, the UK and Singapore questioned the timing of the stake sale as there is no clear roadmap yet to address the lingering fuel subsidy issue.
Finance Ministry is keen on IOC stake sale to meet the fiscal's disinvestment target of Rs 40,000 crore.
The sale of 19.16 crore IOC shares at the current price would fetch the government less than Rs 3,750 crore. The government holds 78.92% stake in the country's largest oil refiner as on June 30.
Citibank, HSBC and UBS Securities are among the five merchant bankers selected to manage the IOC share sale.
IOC has 10 refineries with 65.7 million tonnes of crude oil processing capacity, which constitutes 31% of the domestic refining capacity. It has 11,000-plus km of crude oil, product and natural gas pipelines and a 44% fuel market share. Also, it is the second largest petrochemical firm in the country behind Reliance Industries.
It is expanding its footprint in oil and gas exploration, LNG, wind and solar power besides venturing into nuclear energy to become an integrated energy company.