The Hindu Business Line : IOC, ONGC differ over cross-holdings

Not seeing eye-to-eye over the future of each other's cross-holdings, IOC has expressed opposition to the suggestion put forth by cash-flush ONGC for buy-back of each other's equity. ONGC on its part is not in favour of the proposal of IOC selling ONGC's equity in the market.

IOC holds 9.62 per cent of ONGC while ONGC holds 9.11 per cent stake of IOC. A Petroleum Ministry official said that the issue of resolving the various views over cross-holdings is likely to come up before the Cabinet shortly.

Mr M. Ramachandran

"Give me one good reason why I should buy back my shares from ONGC," asks Mr M. Ramachandran, Chairman, IOC. "IOC is not keen on a buy-back. We need money, but ONGC does not need money," he said.

Hard-pressed for cash and badly in need of resources, IOC has suggested unlocking each other's cross-holdings in the market. The proceeds from such sale would go to the respective companies, while capital gains arising out of the transaction would flow into the Government's kitty.

"As such, my shares in the market are very less. If I go for a buy-back, the Government's holding in ONGC will go up and my shares will be extinguished," Mr Ramachandran noted. Among other things, this would affect the company's borrowing ability with a resultant impact on its on-going projects, a senior IOC official explained.

Mr Subir Raha

But, ONGC is plumping for a buy-back, opposing IOC's suggestion to sell these holdings in the market. "We are not in need of money right now and as such have no plans to off-load in the market IOC or GAIL shares that we hold as part of the cross-holdings," Mr Subir Raha, Chairman & Managing Director, ONGC stated.

Explaining further, he said that ONGC was against IOC selling its shares in the market since this would increase the floating stock further. "Our floating stock increased from about 4 per cent to about 14 per cent after the public offer in March 2004. If IOC sells our shares in the market now, the floating stock will go up further to about 24 per cent. We feel that this will destroy value," Mr Raha noted, arguing that buy-back was a better option.

The dispute was referred to the Union Petroleum Minister, Mr Mani Shankar Aiyar, who after hearing both the sides favoured a buy-back, but IOC is lukewarm to the proposal.

Meanwhile, the Ministry is moving a note to the Cabinet Committee on Economic Affairs (CCEA) seeking a fresh approval for unlocking the cross-holdings in oil PSUs - IOC, ONGC and GAIL. During the NDA regime, a CCEA meeting held on December 18, 2003, agreed to allow oil PSUs to sell their cross- holdings in the market.

However, this was put on hold a few days later when on December 24, the Cabinet Committee on Disinvestment (CCD) decided to go for a public offer of 10 per cent Government equity in ONGC and GAIL, along with four other PSUs with a view to raise funds to meet the disinvestment target.

While clearing the public offers in ONGC and GAIL, the CCD had prescribed a lock-in period of six months after the public offer for the sale of the cross-holdings in the market to avoid over-crowding. "The six months lock-in period ended in September 2004 and we are re-visiting the CCEA seeking a fresh mandate for the sale of cross-holdings," a senior Ministry official disclosed.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page