IOC may tank up via equity sale
IOC is likely to sell a part of its investments in ONGC and Gail India to raise further funds and tide over an acute and worsening liquidity crunch.
By TNN |
MUMBAI/NEW DELHI: India's biggest refiner and marketer Indian Oil Corporation (IOC) is likely to sell a part of its investments in state-owned ONGC and Gail India to raise further funds and tide over an acute and worsening liquidity crunch, a senior official said.
IOC holds 16.45 crore shares or 7.69% in ONGC valued at Rs 14,438 crore. It also holds another 2.04 crore shares or 2.41% of Gail India valued at Rs 816 crore.
IOC chairman Sarthak Behuria on Wednesday said that the company is facing an acute liquidity crunch that has forced it to put on hold all new projects. If the current scenario continues (rising global crude oil prices and no change in retail fuel prices), "the company would not have any money (liquid cash) by September end," he said. The situation would be such that "we have to convert our capital assets to have liquidity," he added.
"Selling our investments in ONGC and Gail will be our last resort. First, we want to raise money through borrowings. We have even sought to increase our borrowing limits to Rs 80,000 crore," IOC's director finance, S Narashiman told ET.
IOC holds 16.45 crore shares or 7.69% in ONGC valued at Rs 14,438 crore. It also holds another 2.04 crore shares or 2.41% of Gail India valued at Rs 816 crore.
IOC chairman Sarthak Behuria on Wednesday said that the company is facing an acute liquidity crunch that has forced it to put on hold all new projects. If the current scenario continues (rising global crude oil prices and no change in retail fuel prices), "the company would not have any money (liquid cash) by September end," he said. The situation would be such that "we have to convert our capital assets to have liquidity," he added.
"Selling our investments in ONGC and Gail will be our last resort. First, we want to raise money through borrowings. We have even sought to increase our borrowing limits to Rs 80,000 crore," IOC's director finance, S Narashiman told ET.
| | Also Read |
| �� | |
| �� | |
| �� | |
| �� |
However, this move will come only after IOC has exhausted its borrowing limits. IOC's borrowing has risen to Rs 38,000 crore from Rs 28,000 crore in the last fiscal and it is borrowing at the rate of Rs 2,000 crore to meet its working capital requirement.
The liquidity crunch is likely to have an impact on the availability of fuel in the retail market in the future. Mr Behuria has said that IOC would not import fuel (particularly diesel) to meet domestic demand.
"We will continue our refining activities and money would be spent to buy crude. We can sustain a domestic (diesel) demand growth up to 10-12% but certainly not to the current abnormal growth which is about 22%," he said.
IOC had sold 2.04 crore shares of Gail in March 2006 at Rs 275 per share and 2.74 crore shares of ONGC in April 2006 at Rs 1,340 per share through bulk deals, realising Rs 561 crore and Rs 3,670 crore respectively.
An analyst working with an international firm based in Mumbai said, "IOC may sell a part of its strategic equity investments in ONGC and Gail. The purchase value of such investments was Rs 1,903 crore, while IOC can raise over Rs 15,250 crore by selling them at current prices.
However, this may not be the opportune time for IOC to sell its strategic investments in ONGC and Gail, which it calls as hidden reserves. ONGC shares closed at Rs 875 on BSE on Wednesday compared to its all time high of Rs 1,387 on November 2, 2007. The ONGC stock has lost 7% in the last one week and 17% in the last one month.
Similarly, Gail shares closed at Rs 400 on BSE on Wednesday against an all time high of Rs 555 on January 1. The Gail stock gained 2% in the last week and lost 8% in the last month.
Indian Oil, which controls 40% of the nation's refining capacity posted a net loss of Rs 414.27 crore in the fourth quarter ended March 31, 2008 compared to Rs 1502.69 crore profit in the same quarter previous year. The net profit of IOC for entire 2007-08 also dipped by about 7% at Rs 6,962.58 crore, compared to 7,499.47 crore in 2006-07. This would be IOC's first loss in last nine quarters as subsidies failed to offset losses from selling fuels below cost.
The company reported a 12.1% growth in its turnover for 2007-08 at Rs 247,479 crore. The company received Rs 18,997 crore oil bonds during the year. Shares of IOC on BSE increased marginally by 1% to close at Rs 425.65 over the previous day close. The stock has gained 4% in the last one week and has lost 4% in the last one month.
However, this may not be the opportune time for IOC to sell its strategic investments in ONGC and Gail, which it calls as hidden reserves. ONGC shares closed at Rs 875 on BSE on Wednesday compared to its all time high of Rs 1,387 on November 2, 2007. The ONGC stock has lost 7% in the last one week and 17% in the last one month.
Similarly, Gail shares closed at Rs 400 on BSE on Wednesday against an all time high of Rs 555 on January 1. The Gail stock gained 2% in the last week and lost 8% in the last month.
Indian Oil, which controls 40% of the nation's refining capacity posted a net loss of Rs 414.27 crore in the fourth quarter ended March 31, 2008 compared to Rs 1502.69 crore profit in the same quarter previous year. The net profit of IOC for entire 2007-08 also dipped by about 7% at Rs 6,962.58 crore, compared to 7,499.47 crore in 2006-07. This would be IOC's first loss in last nine quarters as subsidies failed to offset losses from selling fuels below cost.
The company reported a 12.1% growth in its turnover for 2007-08 at Rs 247,479 crore. The company received Rs 18,997 crore oil bonds during the year. Shares of IOC on BSE increased marginally by 1% to close at Rs 425.65 over the previous day close. The stock has gained 4% in the last one week and has lost 4% in the last one month.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
