ONGC, OIL buy 10% govt stake in IOC
State-owned ONGC and Oil India Ltd (OIL) on Friday bought 10% government stake in Indian Oil Corp (IOC) for Rs 5,340 crore. The stake sale has doubled government's disinvestment proceeds for the current fiscal to Rs 10,434 crore.business Updated: Mar 14, 2014 19:54 IST
State-owned ONGC and Oil India Ltd (OIL) on Friday bought 10% government stake in Indian Oil Corp (IOC) for Rs 5,340 crore.
The stake sale has doubled government's disinvestment proceeds for the current fiscal to Rs 10,434 crore.
In off-market transactions, Oil and Natural Gas Corp and OIL bought 5% stake each at Rs 220 per share.
ONGC chairman and managing director Dinesk K Sarraf confirmed his company's buying 12.135 crore government shares in IOC at Rs 220 per share. OIL head SK Srivastava said his firm paid Rs 2,670 crore for the 5% shares in IOC.
IOC shares closed at Rs 269.20 on the Bombay Stock Exchange (BSE), down 1.90%, over the previous close.
An Empowered Group of Ministers (EGoM) headed by finance minister P Chidambaram had on February 28 decided to sell the stake in IOC, the nation's largest oil firm, at a discount of 10% through an off-market deal.
Sources said the IOC scrip traded at about Rs 245 on that day and a 10% discount to that price was calculated to arrive at a selling price of Rs 220 a share. Also, Rs 220 is the three-month average trading price of IOC shares.
The sale of the 10% stake, or 24.27 crore shares, happened through an off-market transaction, with ONGC and OIL each buying 5%.
With the stake purchase, ONGC's holding in IOC has increased to 13.77% from 8.77% stake. OIL did not previously hold any shares in IOC.
After the disinvestment, government shareholding in IOC has come down to 68.92%, from 78.92%.
The government had so far raised about Rs 5,093.87 crore through stake sales in PSUs during current fiscal. It had lowered the revenue generation target from disinvestment to Rs 16,027 crore, from Rs 40,000 crore set at the beginning of the fiscal.
The Cabinet had originally approved sale of stake in IOC through an offer for sale. But the petroleum ministry opposed it saying that IOC shares should not be sold through an offer for sale as the price did not reflect the right valuation of the company.
The EGoM then, on January 16, decided to sell the stake through block deal. Following this, IOC shares surged by more than Rs 42, following which ONGC and OIL, however, wrote to the petroleum ministry saying they would each buy a 5% stake in IOC at the six-month average traded price and not at the current rate.
The government then decided to offer the IOC shares to the companies at a 10% discount to the current market price through an off-market deal.