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IOC against further dilution of stake in ONGC

Pratim Ranjan Bose

Plans to tap bond market to raise funds


Bond plans
IOC's borrowings have come down to Rs 23,500 crore, lower than Rs 25,000 crore in March 31, 2006.
The company has recently secured Rs 1,000 crore of loan-finance from OIDB for Parazylene-PTA project in Panipat.
It has requested the Union Ministry of Petroleum and Natural Gas to restrict the tenure of the proposed fresh issue of Rs 28,000 crore oil bonds between three and five years.

Kolkata , June 29

Indian Oil may not go for further sale of stake in ONGC and may instead tap the bond market, if need be, to raise finances. Following the dilution of stake in ONGC by 1.92 per cent in April this year, the company now holds 7.6 per cent in ONGC.

A company official said that the stake sale (at a net gain of Rs 3,225 crore) followed by Government's decision to enhance prices as well as announce a reimbursement package (through subsidy sharing by upstream companies and oil bonds) to OMCs to mitigate the under-recoveries, had reduced the pressure on finances to a large extent. "IOC's borrowings which went past Rs 26,000 crore in April have now come down to Rs 23,500 crore, lower than Rs 25,000 crore in March 31, 2006. There is no apparent threat for reduction in head-room as well as an adverse debt-equity ratio. Accordingly, we are no longer considering dilution of stake in ONGC as a priority option and may instead issue bonds, if required, to raise finances," the official said.

The company has recently secured Rs 1,000 crore of loan-finance from Oil Industry Development Board (OIDB) for Paraxylene-PTA project in Panipat.

Oil bond liquidity

Meanwhile, the company has requested the Union Ministry of Petroleum and Natural Gas to restrict the tenure of the proposed fresh issue of Rs 28,000 crore oil bonds to between three and five years and make the bonds an `eligible security' for investment by Provident Fund authorities.

Also sought was SLR (statutory liquidity ratio) status to improve the liquidity of the same.

According to sources, the Ministry has already taken up the issue with the Finance Ministry and was expected to arrive at a decision in July. IOC expects a share of roughly Rs 3,700 crore of oil bonds in every quarter (Rs 14,800 crore for 2006-07). It may be mentioned that the last issue of (interest bearing) bonds were of three to nine year tenure.

The bonds were also not awarded any special investment status.

"Out of a share of Rs 6,500 crore oil bonds received by IOC last year the Rs 4,300 crore six- and nine-year bonds witnessed very little demand from the market. In fact nine-year bonds did not find any takers," the official said.

IOC shares closed at Rs 399.80 on the NSE on Thursday, 2.9 per cent lower than the closing price of Rs 402.70 on Wednesday.

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