Government on Friday approved the Indian Oil Corporation stake sale at a discount of 10 percent to Oil and Natural Gas Corporation and Oil India, 5 percent each despite ONGC already holding 8-9 percent shares. The move is likely to fetch the exchequer a sum of Rs 5,300 crore.Speaking to CNBC-TV18, Aloke Banerjee, director Finance, ONGC says the company is not disappointed by the government’ decision to sell 5 percent to ONGC as barring the last six months, IOC has always been a good buy and therefore, the company can sell it whenever required.
ONGC is likely to close the year with a cash balance of around Rs 5000 crore.
Below is Aloke Banerjee's interview with Reema Tendulkar and Nigel D Souza on CNBC-TV18
Reema: Is it confirmed, it is going to be via block deal and at 10 percent discount to the market price? Could you define what will be the market price, will it be one day closing prior to the date of transaction, will it be six month average so then accordingly we can calculate what your 5 percent stake would yield?
A: Today empowered group of ministers (EGoM) was there but I am not sure if the decision is taken by EGoM because I am also waiting for the final decision taken by the EGoM. As far as Oil and Natural Gas Corporation (ONGC) is concerned, ONGC’s board in principal agreed to pick up 5 percent stake of Indian Oil Corporation (IOC) and they are suggested for off market deal and price with 10 percent discount than the market price, proposed by ONGC. You have to wait for the principal decision, wait for EGoM’s approval. If we get the EGoM’s final decision, we will take the final call accordingly.
Nigel: If 3 percent will go up to around 12 percent, if its 5 percent, it will go up to around 14 percent – you said you can get out of it any time, so is it an off market transaction? Have you taken the approval of Sebi and other regulators?
A: Whatever formalities are there, we will comply with those formalities.
Nigel: What stage has it reached?
A: We are waiting for EGoM’s final decision because we have given in principal board approval but the board has to take the final decision as per the EGoM.
Reema: What will be the cash balance left with ONGC post this?
A: ONGC is expected to close the year around Rs 5,000 crore. It all depends upon capex. Last two months are vital for us. Capex - we had a plan of Rs 35,000 crore for the entire year but we may slightly exceed the target, so our cash balance will depend on that basis. We expect it will be in the range of Rs 5,000 crore after this buy of IOC.
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