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Saturday, September 01, 2007

Govt approves Oil India IPO, divestment of 10%

The Cabinet Committee on Economic Affairs (CCEA) on Thursday paved the way for Oil India (OIL) to go in for an initial public offering (IPO) along with a sell-off of Government equity.

Briefing newspersons after the CCEA meeting, Finance Minister P Chidambaram announced that the committee had approved an IPO of 10 per cent fresh equity of OIL along with the sale of 10 per cent of the Government’s stake in the existing share capital of the public sector oil exploration major. OIL has also been allowed to offer one per cent of its equity stake to employees. Out of the Government’s existing equity stake in OIL, five per cent is to be offered to Indian Oil Corporation, and 2.5 per cent each to Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), the three state-owned oil marketing companies (OMCs). The issue price or the price brand of OIL shares, Mr Chidambaram said, would be cleared by an empowered Group of Ministers on disinvestment already in place. He made it clear that the issue price of shares under the IPO as also those being handed over to the OMCs would be the same.

The offloading of OIL shares in favour of the three OMCs would not only strengthen their existing synergies but also help them in raising resources through disposal of the allotted shares in the open market at an opportune time to tide over their under-recoveries on sale of fuel, an official statement said.

The fresh issue of 10 per cent of OIL’s paid-up equity capital would also meet SEBI’s requirement of listing the company’s share on the bourses. This would not only make OIL more amenable to market discipline but would also boost the company’s image. Besides, this would help it to raise resources for its future expansion and growth, the statement noted.

The proceeds of disinvestment of Government holding in favour of IOC, HPCL and BPCL would be used for meeting the needs of social sector programmes, reports The Hindu.

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