Gearing up

Calcutta, March 13: The proposed merger of IBP with its parent, Indian Oil Corporation (IOC), will be delayed till September as the process is yet to get a formal go-ahead from the ministry of petroleum and natural gas.

The boards of both the companies have already approved the deal and a share swap ratio of 5:4 has been announced. The proposal has been sent to the ministry, which is yet to clear it. Earlier, a deadline of March 31 was considered for the completion of the merger process.

Following the approval of the ministry, the companies have to take views from the departments of finance, law, labour and disinvestment.

?After their comments are incorporated, an extra ordinary general meeting will be called for both companies. Following shareholders? nod, the legal process will start, which may take about four months. So the merger will be effected not before September,? sources said.

An early merger with IOC will benefit IBP, which has plunged deep into losses. Being a standalone marketing company without the support of refinery margin, IBP could not withstand the spiralling crude oil prices as the government did not allow a corresponding rise in retail price in the domestic market.

As a result, it suffered losses of Rs 167.55 crore in the first nine months of 2004-05 against Rs 121.12 crore profit in the corresponding period last year. After the merger, IBP will become a division of IOC, which will sport a consolidated balancesheet.

IOC is considering the trust route for the merger. In this process, IOC?s share in IBP will be put under a trust that will be created soon.

The ministry is looking at the nuances of the trust route before giving a final go-ahead, sources added.

IOC, which holds a 53.58 per cent stake in IBP, had paid Rs 1,840 crore to buy the government?s 33.58 per cent share through divestment and make an open offer for another 20 per cent stake.

IOC paid Rs 1,551 per share while the current market price of IBP stands at around Rs 570. IOC has to take a hit on its investment if it does not park shares in a trust.