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ONGC in no hurry to sell stakes in IOC, GAIL

Company to wait for right prices as it has decent return on capital
ONGC's KG basin project
ONGC's KG basin project
Source: ONGC annual report

PTI   |   New Delhi   |   Published 02.10.18, 07:35 PM

State-owned Oil and Natural Gas Corporation (ONGC) is not in a hurry to sell its stake in Indian Oil Corp and GAIL (India) and will wait for the right price before offloading the shares, a senior company official said.

ONGC holds 13.77 per cent stake in oil refiner IOC and 4.86 per cent in gas utility GAIL India.


“It is true that we are now a fully integrated company. We are India’s largest oil and gas producer and the acquisition of (oil refiner) HPCL has extended our presence in the downstream industries.

“And so naturally, it now does not make sense for ONGC to hold stake in Indian Oil Corp (IOC). But, we will wait for the right price,” said the official.

ONGC, he said, got over Rs 3,000 crore in dividend income from investments in IOC and GAIL in the 2017-18 financial year. “This is a decent return on capital and can help me hold on to shares for long,” he said. “I am in no hurry to sell the stake. We will wait for the right price.”

ONGC’s 13.77 per cent stake in IOC at Monday's closing price of Rs 153.80 apiece on the BSE is worth over Rs 20,500 crore. Its 4.86 per cent stake in GAIL is worth close to Rs 4,200 crore at Monday's closing price of Rs 380.75.

“IOC shares were trading at around Rs 195 in January and are now at Rs 153-154. It doesn’t make sense to sell the shares at such a big loss,” the official said.

ONGC, he said, is generating enough surplus mainly because of international oil prices spiking to a four-year high and the rupee plummeting to an all-time low.

It is using these to pay off a Rs 24,881 crore loan it had taken to buy Hindustan Petroleum Corp Ltd (HPCL) for Rs 36,915 crore. A third of the loan has been pre-paid.

Heavy borrowing

ONGC had borrowed Rs 24,881 crore on a short-term loan to fund buying of the government's 51.11 per cent stake in HPCL. The remaining came from its cash reserves.

The official said the pace of repayment may slow down in the third and fourth quarters owing to outgo on taxes and dividend as also the fact that capital spending would peak by then. Initially, ONGC considered selling its stake in IOC and GAIL to fund the acquisition, but it has never found the right price to offload the shares, he said.

The short-term loan ONGC availed had a provision to prepay without any penalty.

ONGC had held talks with the LIC for selling IOC and GAIL shares but the state-owned insurer insisted on buying them at 10 per cent discount to the prevailing price. 

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