AK Banerjee, Director-Finance, ONGC believes gas price revision will improve the company's revenues and net profit. He expects gross revenues to be around Rs 4300-4500 and net profit at around Rs 2,300-2,400.
He clarified ONGC has not received any official communication to buy stake in IOC. Sources in the finance ministry had said that they have been given an in-principle approval to cross holdings in various PSUs. Hence, it is likely that PSUs buy stake in each other, thereby giving the government some money.
Also read: Expect diesel deregulation to continue into 2014: ONGC
Below is the verbatim transcript of his interview on CNBC-TV18
Q: Have you been officially told to buy the Indian Oil Corporation (IOC) stake, now that the divestment is not going through and would you be happy buying whatever stake you are told to buy?
A: We have not been officially conveyed anything. We have also heard of this and once we get the offer officially then we will look into it.
Q: Does it make sense that you have always been saying that capex is your big requirement; in any case you have been struggling with the net realisation so your cash in any case has been burning quite a bit. For you to not being able to use that cash and store that as a bit of a treasury operation. Do you think that would be justified?
A: Definitely there is a decline in our cash reserves but there is some upside because of gas price revision, so that may give us some extra funds. Secondly, this option has not yet come and IOC is selling at a very low price. So hypothetically, if we can have it then sometime when we need, we can offload also. This is one of the options I am talking about and it is all hypothetical.
However, as far, but if the cash position is concerned, we are optimistic because of gas price revision but we do not know exactly how much will be the subsidy because it all depends on subsidy quantum.
Q: This issue has been taken up in the past; the government has gone for crossholdings of public sector undertakings (PSUs) in 1990s etc. If you are asked to buy the stake, will you be allowed to sell it in the open market as and when you please as well?
A: I think that is one point we may be allowed to do. Since we have huge capex plan and suppose we have to buy IOC stake there also must be some way out so that we can get out of this also at appropriate time.
However, these all options are hypothetical, I cannot comment on that because we have not been conveyed anything officially. But if it comes, we will look into the pros and cons because IOC’s stock is trading at a very low price.
Q: Coming to the gas price, what is your internal calculation suggests, what would the new gas prices be and how would this aid both your revenues and your profitability?
A: Revenue would be in the order of 4,300-4,500 - gross revenue and my profit after tax is expected to be 2,300-2,400 but net earnings will be about Rs 1,300 crore because we have been paying handsome dividend to the share stakeholders including government. So, net earning increase, we are expecting of the order of 1,300-1,400 crore.
Q: Will you be told to compensate any of the power and the fertiliser subsidy?
A: They have not conveyed anything to us that we have to compensate anything and they have also indicated that power sector and fertiliser sector will decide first and then only government will take a view. So, far we are not conveyed anything.
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