India’s largest oil and gas explorer, Oil and Natural Gas Corporation (ONGC) said it is contemplating serious action --- including a legal recourse --- against investment banking firm Goldman Sachs’ “irresponsible remarks” over corporate governance in the state-run firm.
Recommending a ‘sell’ rating on the stock, Goldman Sachs (GS), in a research report on Thursday raised several concerns about ONGC including corporate governance and diversion of cash funds by the Indian government from the company to pay subsidies to non-profitable oil firms. The government controls a 74 per cent stake in India’s most profitable company.
Citing corporate governance issues, GS said the Indian government has taken away nearly “$20 billion” since March 2004 on a quarterly basis, without consulting the minority shareholders. “Issues with corporate governance at ONGC are among the more serious for companies in our coverage universe, in our view,” the 18-page report stated.
ONGC shares 4 per cent following the release of the report, but later recovered and closed the day Rs 652, down 1.9 per cent. The BSE Sensex fell 2.9 per cent.
“It’s a malicious act on their part,” ONGC chairman and managing director R.S. Sharma told Hindustan Times. “The terminology used in the report is highly objectionable. It is very clear from the report that there is a deliberate attempt to damage ONGC’s reputation.”
This, he added, “is unacceptable to us and we are looking at all options including taking a legal recourse against GS.”Corporate governance and concerns over transparency in financial transactions have assumed centre stage after the stunning findings about alleged irregularities in the accounts of technology firm Satyam Computer Services.
Sharma said the investment banker’s report on ONGC was placed before the company’s board on Thursday. “We are meeting again next week and will come out with a step by step rebuttal,” he said.