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Friday, December 08, 2006

ONGC's objection may hit Cairn's IPO

Oil major ONGC, a 30% equity partner with Cairn Energy in the Barmer oil blocks, has shot off a letter to the market regulator Sebi objecting to some of the disclosures made in the draft red hearing prospectus, DRHP filed by Cairn India for its forthcoming public issue, reports The Economic Times.

ONGC has written to Sebi, objecting to what it describes as “partial disclosure of facts” which it says is impacting the credibility of its subsidiary MRPL.

ONGC CMD R S Sharma said: “We have drawn the attention of Sebi and have asked for full disclosures instead of partial facts which is impacting MRPL’s credibility.” The Cairn India IPO is set to open on December 11 and it remains to be seen what happens over the next few days, given the objections raised by ONGC.

“The DRHP states that Cairn’s production schedules for crude may get delayed due to MRPL’s failure to keep its commitment on building the pipeline. But this does not represent all the facts,” he said. “MRPL is under no liability to build the pipeline. We had offered to build it provided we could recover the cost through the discounts,” he said. Moreover, the DRHP does not mention that Cairn and MRPL had signed a joint letter dated June 30, 2005, to build a well-head refinery at Barmer.

“The DRHP has failed to make full disclosures and putting out only a part of the facts has an impact on MRPL’s image and credibility. We would like this to be amended at the earliest before the IPO opens,” Mr Sharma said.

The controversy over the crude offtake has been going on for some time. While Cairn, as the operator of the field, has maintained that it is ready to offer its crude to any company nominated by the government.

MRPL, had been designated as the nominated company, which would offtake the crude from these fields. However, ONGC has maintained that it would be ready to buy the crude from Barmer only if it is economically feasible.

Cairn Energy, which is now floating its Indian subsidiary, is in the last leg of its public issue. Out of total offer of 30.35% equity, the company has made a pre-IPO private placement of around 12% or 20.96 crore shares at Rs 176.80 per share to Petronas, Videocon, Black Rock, Petro Drill and Citibank for approximately Rs 3,700 crore (USD 823 million).

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