Govt may offload 10% equity in OIL

NEW DELHI: The government is likely to clear a proposal to offload 10% of its equity in Oil India, a state-owned oil company. The move is part of an IPO-cum-divestment issue that the company has proposed to raise resources for carrying out its expansion projects and getting its shares listed at bourses.

The IPO-cum-divestment of OIL is likely to come up for cabinet approval on Thursday, an official source said. The proposal involves OIL issuing 10% fresh equity in the market, while the government would piggy back on it and divest 10% of its stake in the corporation.

The 10% disinvestment of the government shares is likely to be purchased by state-run refiners including Indian Oil (IOCL), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL), the source said. However, the companies would not get any preference and would have to purchase the shares at a price determined through a book building process.

The source said that divestment of 10% government shares in OIL may include a preferential allotment of 5% to Indian Oil (IOCL) and 2.5% each to Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL).

OIL is 98.13% owned by the government and the remainder by employees. The proposed IPO of the company is aimed at financing the expansion and investment projects totalling about $3.5 billion over the next five years.

The investments are proposed for expanding the exploration activities, including acquisitions overseas along with IOCL.

The source said that the OIL’s IPO may fetch the company about Rs 1,500 crore. Cash from a divestment may be used by National Investment Fund (NIF) for being spent on social sector schemes.