Reddy: Setting the stage

New Delhi, Feb. 15: A group of ministers today approved a 5 per cent stake sale in state-owned explorer ONGC, which could fetch around Rs 12,000 crore. However, the government is unlikely to meet the divestment target set for the fiscal.

“(The government is) considering the auction route for the ONGC (divestment). No timeline has been fixed yet… the empowered group of ministers (EGoM) is to meet again shortly,” petroleum minister S. Jaipal Reddy told reporters.

The ONGC stake sale is likely to happen before the end of this fiscal. This is the first divestment proposal cleared by the government in nearly nine months.

The auction route is for qualified institutional buyers (QIBs) only and not retail investors. QIBs include mutual funds, FIIs and retail investors.

However, the stake sale of power equipment maker Bhel has been postponed to the next fiscal. The government had planned to offload a 10 per cent stake in Bhel to mop up around Rs 2,500 crore.

Heavy industries and public enterprises minister Praful Patel said, “No decision on Bhel divestment… may happen next fiscal.”

The government, which owns 74.14 per cent of ONGC, plans to sell 427.77 million shares, or 5 per cent of the stake, which will reduce its holding in the flagship explorer to 69.14 per cent. The deal can fetch the government about Rs 12,000 crore at today’s closing price of Rs 278.85 apiece.

The auction route is aimed at allowing the government to complete the divestment process quickly.

Last month, Sebi allowed auctioning of shares through stock exchanges and introduced a new mechanism called the institutional placement programme that would allow promoters to sell up to 10 per cent of their equity capital through an auction.

Despite these decisions, the government may not be able to meet its budgeted divestment target of Rs 40,000 crore this fiscal. Divestment secretary Mohammad Haleem Khan said, “Everybody knows that the Rs 40,000-crore target is now almost impossible.”