Setting aside the objections raised by the state-owned Oil and Natural gas Corp (ONGC) on government’s plans to disinvest 5% of its stake in the company, the finance ministry has decided to go ahead with a stake sale in the country’s largest profit-making public sector undertaking.
“The inter-ministerial group (constituted to take the disinvestment process forward) can now start the process of appointment of merchant bankers and other intermediaries to the issue since the draft Cabinet note for disinvestment of 5% paid up equity capital in ONGC has been approved by the finance minister,” said the minutes of a recent meeting in the finance ministry, a copy of which is available with HT.
“There will always be some objections when it comes to disinvestments but we will have to go ahead with the exercise,” a senior finance ministry official said.
As per the disinvestment roadmap, the government will disinvest 5% paid up equity capital out of Centre’s shareholding of 68.94% in ONGC through offer for sale (OFS) route.
A 5% disinvestment stake alone would help the exchequer raise Rs. 18,000 crore, or close to 42% of the Rs. 43,425-crore disinvestment target fixed by the government in the remaining eight months of the current fiscal.
The government, which has set a fiscal deficit target of 4.1% of GDP, is looking to exceed the disinvestments target, which will then ensure that the red line is not crossed.
Alongside, given the size of the ONGC stake sale, the government has decided to appoint up to five merchant bankers for this OFS. Moreover, only those merchant bankers who have handled at least one domestic issue (IPO/FPO/OFS) of the size of Rs. 1,000 crore or more during the period April, 1, 2011 to June 30, 2014 would be appointed.
A legal advisor will also be appointed and will be a consortium of international legal experts. “Top 10 legal firms as per the prime data base league- table may be invited to submit proposals,” the minutes added.
ONGC had written to the petroleum ministry to first resolve issues like fuel subsidy sharing and natural gas pricing and to fetch better price. It said any disinvestment at this stage may not realise the true value of the company shares.
Stating that the stake sale should happen only after the resolution of these issues, it wrote: “It would be prudent that before divestment of ONGC’s shares by the government, these issues are resolved so that the realisation of the government from divestment of ONGC’s shares is optimised.”
The government uses the OFS route to divest its stake in PSUs that come in top 100 companies as per market capitalisation. So far it has divested stake in 11 PSUs through this route.