ONGC $3 billion share sale seen set to go ahead
New Delhi: Oil & Natural Gas Corp (ONGC) will file for a near $3 billion share sale by the end of February and expects to launch the offer in mid-March, as planned, its finance chief said on Sunday.
D.K. Sarraf, ONGC's director of finance, told Reuters he expects the sale to raise 125-130 billion rupees ($2.7 billion-$2.8 billion), depending on the government's pricing.
"We are expecting a good response from all quarters, including foreign and retail investors,"says Sarraf.
The government, which owns 74.14 per cent of ONGC, plans to sell 5 per cent in the offer as part of wider plan to sell stakes in about 60 state-run firms over the next few years to cut its fiscal deficit and garner funds for the poor.
But the main Indian share market index has declined 13.6 per cent this year, as foreign funds pulled out a net $1.5 billion from equities.
Last week the chairman of Indian Oil Corp, the country's biggest refiner and oil retailer, said its planned share sale would be delayed due to unfavourable market conditions and rising global crude prices.
However, Sarraf said ONGC was sticking to its earlier plans of launching its share sale around mid-March. ONGC's Chairman A.K. Hazarika said on February that the offer may open on March 15.
ONGC has already started 'pre-marketing' meetings with local funds and investors, Sarraf said, with overseas road shows for the sale planned for immediately after the regulatory filing.
Uncertainty about India's oil subsidy regime clouds the outlook for ONGC, which is forced to sell crude at a discounted price to state-run refiners who in turn sell diesel, cooking gas and kerosene at prices set by the government.
Also, ONGC owns a 30 per cent stake in some of the assets of Cairn India, whose parent Cairn Energy has agreed to sell up to 51 per cent of the Indian unit to London-listed miner Vedanta Resources.
ONGC pays 100 per cent of the royalties on those assets to the government, and now wants Vedanta to pay a share or account for royalty payments in the overall exploration costs, delaying the deal. The oil ministry has said it will protect ONGC's interests.
"These questions are being asked, but all these are already known in the market and hence not likely to have any bearing (on the share sale)," Sarraf said, when asked if investors were concerned about the subsidy regime and the Cairn royalty issue.
Bank of America Merrill Lynch, Citi, HSBC, JM Financial, Morgan Stanley and Nomura have been appointed to manage the share sale.
Shares in ONGC, the country's second-most valuable listed firm with a market capitalisation of over $52 billion, closed 1.4 per cent higher on Friday. The shares are down about 14 per cent this year in line with the broader market.
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