New Delhi, Dec. 18: The Union cabinet today approved the dissolution of the cross-holdings between state-owned oil firms Oil and Natural Gas Corporation (ONGC), Indian Oil Corporation (IOC) and Gail India Ltd, a move that will fetch it about Rs 1,300 crore in tax.
While IOC has a 9.62 per cent stake in ONGC and a 4.8 per cent holding in Gail, ONGC has a 9.11 per cent stake in IOC and a 4.82 per cent holding in Gail.
Gail, in turn, has a 2.4 per cent stake in ONGC.
“The modalities for the sale — like timing, tranches and mode (whether in domestic or overseas market) — will be decided by the respective company boards in consultation with ministry of petroleum and natural gas,” highly placed sources said.
The government currently owns an over 80 per cent stake in both IOC and ONGC and a 67 per cent stake in Gail.
The petroleum ministry wants to phase out the sale in such a manner so that the shares of a particular company do not flood the stock market at any point in time.
“This would lead to a disastrous fall in the scrip prices,” a senior official said.
ONGC had initially objected to Gail’s move to sell its 2.5 per cent stake in the open market on the ground that this sudden one-time offloading of shares would depress the stock price and erode its market cap.
Gail’s plans to sell its own shares in the open market have had to be postponed several times in recent years as the stock market was in a depressed state and did not reflect the true value of the gas major’s shares.
The sale of the cross-holdings will help the oil companies garner funds to meet the 10th plan outlay. ONGC has committed to investing over Rs 50,000 crore during 2002-07, while IOC has committed Rs 24,400 crore investment. Gail has planned an investment of Rs 8,400 crore.
The oil companies have been making requests for unlocking the cross-holding so as to increase liquidity of their shares.
Currently, about 4 per cent of the ONGC stake is traded in the stock market and even a 1 per cent addition will increase the market capitalisation of the stock by Rs 1,000 crore.
Stocks flare up
Oil and gas stocks were on fire today on hopes of generous dividend payout and cabinet clearance on disentangling cross-ownership of shares in Indian Oil Corporation, Oil and Natural Gas Corporation (ONGC) and Gail (India).
Shares of four key oil companies — Bharat Petroleum, Gail, ONGC and Kochi Refineries — recorded substantial gains and hit new 52-week highs today, while the likes of Hindustan Petroleum, Indian Oil and Chennai Petroleum gained in the range of 3.5 to 6 per cent.
The management of three oil companies — BPCL, HPCL and Indian Oil — will meet next week to consider payment of interim dividend.