IOC divestment govt's call, but this not right time: Goyal

The Cabinet today cleared the proposal for sale of 10 per cent government stake in Indian Oil Corporation, which may fetch around Rs 3,750 crore to the exchequer at the current market price. Speaking to CNBC-TV18, PK Goyal, director-finance of IOC says, even though it is the government’s call, he feels now is not the right time for divestment. "The sentiment is not good with the rupee depreciation, rising under-recoveries," he says.

He also said the PSU hasn’t heard from the government on hiking diesel prices monthly by more than 50 paise.

Agreeing with Goyal, former oil secretary SC Tripathi says IOC market capitalization does not reflect its true strength, which has a turnover of more than Rs 4 lakh crore.

"I would suggest government should privatise one of the other two refining and marketing companies – BPCL and HPCL. In fact HPCL had been taken up for disinvestment and privatisation in the NDA regime but because of technical difficulties it had been nationalised by an act of Parliament," he told CNBC-TV18.

Gagan Dixit, Oil Analyst, Quant Broking says: "The oil marketing companies (OMCs) have negative correlation with the rupee and basically it not only impacts their subsidies, pay costs etc, but also increase their dependence on the government for the subsidy and subsequently there is less the earning visibility. Also, there is now some higher inventory requirements. There are liquidity problems. All these will contribute to the underperformance of the stock."

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Are you disappointed with the timing of the disinvestment? The stock is trading at sub-book and multi year-lows. Was this the right time for government to go ahead?

A: Government of India has taken a decision and they are doing the disinvestment under their holding. At this moment market sentiments are not good because rupee is depreciating and under recoveries are increasing.

IOC share value which in February was between Rs 325-350 today is now Rs 195. So, this is a government of India call, I have no comment to offer in that regard. This is not the right time for this because sentiments are not good.

Q: In your conversations with some of the institutional investors do you sense there will be an appetite for the company at the price?

A: We have just done our bond issue and this has been subscribed very well and all the investors supported our bond issue which we have raised last week of USD 500 million. So, I don’t think there is anything negative about IOC in that regard.

Q: Don’t you think that this business of moving from trade parity to export parity is going to be a significant overhang as far as the divestment is concerned?

A: I can't comment on that because already the committee is reviewing this aspect.

Q: Last time when we spoke to you, you were talking to the government to increase the quantum of diesel price hikes. As of now you are only allowed 40-50 paise, any progress on that front?

A: We have not heard anything from the government. Ministry and government of India have to take a decision in that regard.