No plans to sell Mozambique asset now: Videocon

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Royal Dutch Shell Plc has made an agreed 992.4 million pounds bid for Mozambique-focused Cove Energy, offering a full price to open up a new gas frontier for the Anglo-Dutch oil major in East Africa.

Cove's main asset is an 8.5% stake in the Rovuma Offshore Area 1. Bharat Petroleum and Videocon own minority stakes in the Rovuma license.

In an interview to CNBC-TV18, Venugopal Dhoot, chairman and managing director of Videocon says, at that price, the valuation of Videocon will be more than USD 2 billion, around Rs 10,000 crore.

He further says, the company doesn't have any plan to sell this Mozambique asset at such a low price. "As more and more discovery comes, Mozambique will be a great asset for us," he adds.

Below is the edited transcript of his interview with CNBC-TV18's Mitali Mukherjee and Sonia Shenoy. Also watch the accompanying video.

Q: Could you confirm for us that Shell indeed has put in a bid for Cove Energy? What have they valued the Mozambique block at?

A: We are having 10%. At that price, the valuation of Videocon will be more than USD 2 billion, around Rs 10,000 crore. But this is not the end because Shell has given the offer, but 20 people have taken the forms. So, another offer will be coming, Cove will be settling at more than this price.

We have gas in Mozambique which has got great valuation. We were expecting that. That's not a big deal. Cove Energy is selling at a very lucrative and very low price.

Q: So, is Videocon willing to exit this stake at this particular valuation? Can you give us any sense of a timeline on when all this could come through?

A: Videocon doesn't have any plan to sell this Mozambique asset at such a low price. Thirty trillion cubic feet gas is discovered there. They are going to have this LNG plant over there. So, it has got a great future. It will double anytime.

As more and more discovery comes, Mozambique will be a great asset for us. Mozambique is the second largest oil field in the world and the best discovery of the last year. So, in our opinion, we must keep this with us for future time to come. So, at the moment, we don't think USD 2 billion is not the price, it's a small price. We will not sell that.

Q: In case there is a better offer made and the stake sale does go through, what kind of a relief are you expecting to see for the company in terms of the funding that comes through into the balance sheet?

A: Funding may or may not come. It is an asset. This asset will be valued like anything. If you go on a cash flow, it may have a very big cash flow as the field starts. Field may start in another five-six years time and if production will be too high. So, what Cove Energy is getting from entire field, one can have the profit for 10% stake, more than that what cove energy getting for yearly basis. So, yearly profit will be more than what Cove Energy is getting today. So, there shouldn't be a desperate sale. I don't understand why Cove Energy has given it at a so small price. May be possibly this is just an offer they will negotiate and they will also get a proper price for that.

Q: Who are the other bidders, aside from Shell? Who takes the decision, is it a consortium or stake holders who takes the final decision on which bid seems the most lucrative?

A: I think it's a Cove Energy's decision. There are many who will be coming. All across the globe, there is euphoria for this Mozambique field. Many people will be coming and bidding. This is just the beginning.

But Videocon is not only in this Mozambique oil field. We have better oil fields in Brazil, ten blocks in Brazil. Oil price at USD 125 is very good for us. Videocon is not in hurry to dispose off this asset and get the profit for our shareholder in future time to come.

Q: If Shell does turn out to be the eventual buyer of this stake, what is the plan for Videocon? Will you exit the block and sell your entire stake? Do you want to stay committed in part percentage?

A: We want to stay committed in full percentage; 10% of us, and 10% BPCL, 20% together. Even in Brazil we are together. We are holding 40% equity in some of the field, 25% equity in some of the field together. So, we want to remain together. We will show our India strength there that this gas is possible and India may require gas. That gas can come to India. So, we want to hold it.

Q: There is some talk in the market of the demerger of the oil and gas asset for Videocon. Can you confirm or deny that for us?

A: Our shareholder must get the benefit of oil discoveries. So, what to do on that our board of directors committee is there and they will decide how our shareholder should get the maximum benefit. At the moment we are looking for Brazil also. In Brazil also huge discovery is possible, let us accumulate the asset and after that a true ratio will be decided and if BOD think it's necessary to allot the shares of oil business or how to deal it has not been decided so far.