RS Sharma, former chairman of state-run Oil and Natural Gas Corporation (ONGC) says that government will not realise good value from the company's FPO without providing clarity on issues like pricing and subsidy sharing. He further said that one-third subsidy sharing in the first quarter of FY11-12 is unlikely to aid sentiment of the company significantly.
Seconding his opinion, even industry watchers are of the opinion that uncertainly on the pricing formulae has dampened investor interest in the sector. Meanwhile, shares of the company are trading at 261.35, marginally up by 0.13% on the Bombay Stock Exchange (BSE).
Analysts tracking the oil and gas sector re-iterate that unless the government reduces losses in the sector and provides a transparent and reliable subsidy sharing mechanism, investor interest is going to be hard to come by. Amidst the investor fraternity, there is very low clarity on what are ONGC's future realisations going to be like. Below is the verbatim transcript of the interview with RS Sharma. Also watch the accompanying video. Q: There has been murmurs since yesterday that pre-FPO, there is a promise from the government of 33% subsidy sharing for Q1 at least. Do you think that will follow, and will that be enough to draw the investors into the FPO?
A: As of now, I feel the investor confidence is very low. Especially in the last quarter of the last fiscal, all of a sudden, when this subsidy burden on ONGC was increased, that was a time I was doing some investor road shows overseas, I could see the sentiments being very low. I was pained by the way the decision got taken and reaction coming from the investors has been very severe. Q: Some oil and gas analysts pointed out that they want some kind of clarity and surety on what the figure is, even if it is 38%, and only then can they work around how they want to approach the follow-on. Is that the sense you got
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