• ONGC stake sale: Subsidy burden gone, Centre eyes disinvestment

    The government is understood to be re-evaluating the sale of a 5% stake in ONGC now that the oil and gas explorer will not bear any part of the subsidy burden arising out of under-recoveries from the sale of fuels. Officials privy to the developments told FE the sale could take place as soon as “the third quarter of the current financial year”. The disinvestment already has the approval of the Cabinet.

    At current prices, the stake sale could fetch the government in excess of Rs. 110 billion. On Monday, the ONGC stock lost 3.84% to close at R250.50 on the BSE. The Sensex fell 373.94 points to close at 28,294. 28. Between April and now, the ONGC stock has rallied 21% against a 13% gain clocked by the benchmark gauge. Should the sale go through, the government’s shareholding in the upstream oil company would fall to 63.93% from the current 68.93% and it will have moved closer to its FY17 disinvestment target of raising Rs. 565 billion. While Rs. 360 billion is sought be mopped up through stake sales in public sector undertakings, another Rs. 205 billion is to be raised from strategic disinvestment.

    The Maharatna has been on the government’s disinvestment radar for some time now. In late 2014, roadshows were held in some cities overseas but the proposed issue did not receive an enthusiastic response from investors who were concerned about the quantum of subsidy to be borne by the company. This time around too the government is treading carefully, not wishing to miss the disinvestment target yet again.

    The government has so far raised Rs. 31.83 billion in 2016-17 via disinvestments in NHPC and the sale of shares in Indian Oil and NTPC to their employees. The department of investment and public asset management will be looking to come up with at least one big-ticket offer for sale or IPO although a slew of buybacks is expected to bring in a chunk of non-debt capital receipts of an estimated Rs. 130 billion. More than a dozen companies have been asked to buy back shares to the extent they can by an amount equivalent to 25% of the aggregate of their fully paid-up share capital and free reserves. At the end of March 2015, CPSEs had surplus cash of about Rs. 2550 billion.
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