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Merger plan: IOC, IBP awaiting nod from stock exchanges
Boards moot fresh swap ratio of 110:100

Richa Mishra

IBP, which has taken the worst hit for selling petroleum products below cost, is optimistic about completing its merger procedure by March 2006.

New Delhi , Feb. 10

SHAREHOLDERS of IBP Co may not have to wait long before they get their entitlement of Indian Oil Corporation (IndianOil) shares.

According to an IndianOil executive, after seeking the approvals of their shareholders on the revised swap ratio for the merger proposal, the companies have written to the stock exchanges (National Stock Exchange and the Bombay Stock Exchange ) about the merger move.

While the nod from the National Stock Exchange is expected soon, Bombay Stock Exchange has sought certain clarifications from the companies, which have been given, the executive said. The boards of IndianOil and IBP have now suggested a fresh swap ratio of 110:100 i.e. 110 equity shares of Rs 10 each of IndianOil as fully paid-up for every 100 equity shares of Rs 10 each of IBP.

Asked about the nature of clarifications sought, the official said these were very minor issues. Once the approval of the stock exchanges are available, IndianOil will approach Ministry for Company Affairs to seek its permission to convene an Extraordinary General Meeting (EGM) for the merger proposal of IBP with the parent.

As on December 31, 2005 the shareholding pattern of IBP was as follows the promoters had 53.58 per cent stake, institutional investors had 32.33 per cent and others (including public) had 14.08 per cent.

IBP, which has taken the worst hit for selling petroleum products below cost, is optimistic about completing its merger procedure by March 2006. The company has incurred a net loss of Rs 96.33 crore for the third quarter ended December 31, 2005, as compared to a net loss of Rs 98.01 crore for the same period the previous year. The net loss for the period April-December 2005 was at Rs 520.83 crore (as compared to a net loss of Rs 167.55 crore for the same period last year) because of under-recoveries aggregating Rs 923.33 crore on sale of major products during the nine-month period.

IBP's Board of Directors had, at a meeting held on December 22, 2004, accorded approval to the scheme of amalgamation for merger of the company with IndianOil and recommended a swap ratio of 125:100 i.e. 125 equity shares of Rs 10 each of IndianOil's as fully paid-up for every 100 equity shares of Rs 10 each of IBP.

However, the Finance Ministry expressed reservations on the swap ratio, stating that IBP had been over-valued. It had also voiced concern that the proposal needed a review, as it was not favourable to the Government and that it would result in a loss in the Government's stake in IndianOil following the merger. The Government vide letter dated December 26, 2005, while according approval to the scheme of amalgamation advised that the companies Board may re-consider the swap ratio under different valuation scenarios.

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