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ONGC weighs second flotation

New Delhi, Nov. 6: Oil and Natural Gas Corporation (ONGC) plans to come out with a second public offer in the first quarter of the next financial year, which will help fund its gas exploration exercise in offshore and domestic reserves.

Merchant bankers said the state-run firm will seek government permission to divest 5 per cent of its equity it is short by Rs 3,000-4,000 crore to sustain investments of Rs 10,000 crore a year.

“Once the government gives the go-ahead sign, then we will appoint lead managers and registrars to the issue and fix the offer price,” said a top ministry official, adding that ONGC's debt-equity ratio stood at 0.02:1.

Currently, the government holds 84 per cent equity, while financial institutions hold 12 per cent. The remaining 4 per cent is together held by employees and public.

ONGC chairman Subir Raha confirmed the firm would make a public offer to generate resources if the government did not deregulate gas prices which has been capped at 29 per cent of the international price of $4 per million British Thermal Units.

“To raise funds, we can offer our own equity because there is barely 4 per cent in the market and issuing equity means it is a zero-cost money,” Raha told The Telegraph.

But if the firm is able to sell gas at international prices, then the firm would have enough resources to sustain its investments. “If gas prices comes to us on an international basis, then we don't need to go to anybody as we have enough resources to sustain our investments,” he said.

Analysts said the offer price would be at a 10 per cent discount to the average traded price during a six-month period. The stock is currently traded at Rs 625.85 and has a price to earnings (P/E) ratio of 8.12. In the past three months, the stock has registered a high of Rs 695 and a low of Rs 470.

Asked if the company was planning to list its stocks abroad, Raha said the company would explore the option of raising funds through the offshore route.

The official said the firm's profit would rise by Rs 5,000 crore on an additional revenue of Rs 9,000 crore if gas is sold at $4 per million British Thermal Units.

He added that the company would also seek government permission to offload it's holdings in Indian Oil Corporation (IOC) and Gail India Ltd.

Officials said ONGC is also in talks with power utility BSES Ltd as well as the Tata and Essar groups to sell 2.5 million cubic metre or 90 cubic feet of gas a day and is seeking a price of $3.5 per million British Thermal Units.

In the first quarter (April-June) of the current financial year, the firm has registered a net profit of Rs 1,980.80, up 34 per cent from the year-ago period.

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