New Delhi, April 26: Indian Oil Corporation (IOC) is close to selling part of its stake in ONGC to financial institutions.
The public sector oil retailer expects to offload around 2.74 crore ONGC shares for Rs 3,900-4,000 crore.
The Indian Oil estimate is based on the current market price of the ONGC scrip, which is trading around Rs 1,325. Indian Oil had acquired these shares at around Rs 160 apiece.
According to sources, Citigroup and JM Financials, the merchant bankers who are handling the sale process, are now in a huddle with the company officials and representatives of financial institutions to work out the deal.
If the financial institutions agree to the price offered by IOC, the deal may be announced before the stock markets open tomorrow.
IOC holds 9.61 per cent in ONGC, or 13.7 crore shares. The board earlier cleared a proposal to sell 20 per cent of this stake.
Indian Oil divested half of its cross-holding in GAIL (India) Ltd, or 20.4 million shares, for Rs 561 crore in March.
The shares were sold at Rs 275 apiece to domestic and overseas financial institutions, including Life Insurance Corporation and ICICI Prudential. The sale was of 2.41 per cent stake of IOCís 4.83 per cent stake in GAIL, or 40.8 million shares.
To cut deficit, the government raised Rs 4,643 crore in 1999 and created cross-holdings of ONGC, Indian Oil and GAIL among each other through its sale of shares in the three oil PSUs.
The shares have shot up over the last seven years and IOCís 9.6 per cent in ONGC is valued at over Rs 18,000 crore. The company had forked out Rs 1,371 crore for the shares. GAIL has a 2.4 per cent stake in ONGC. The IOC board in December approved the sale of 20 per cent of its holding in ONGC and 50 per cent of its holding in GAIL in 2006-07.
The company appointed JM Morgan Stanley and Citi Financials as merchant bankers to manage the sale of its shares in GAIL.
With international crude prices flaring up and the government forcing downstream oil companies to sell their products at fixed prices, IOC has come under increasing pressure.
A senior official said the company wanted to prune down its debts which jumped to Rs 24,000 crore in the first seven months of the current fiscal compared with Rs 17,000 crore for the previous year.
The government offered the PSUs the option to swap shares instead of offloading them in the market. However, IOC opted out from the swap option to meet its hunger for cash.
Meanwhile, ONGC has agreed to assist military engineering services to upgrade their infotech infrastructure. The oil major will provide advisory services free of cost in project management for enterprise resource planning.
The system will be developed at ONGC's data centre and training facilities will also be provided for the army engineers. Apart from this post-implementation assistance will also be extended.