The Hindu Business Line : Petroleum Ministry examining concern over IOC-IBP swap ratio

THE merger of IBP with Indian Oil Corporation may take some time. The Petroleum Ministry is examining the issues raised by the Finance Ministey on the IBP-IOC swap ratio for the proposed merger and respond to the latter in a week's time.

Sources told Business Line that the Petroleum Ministry would like to take a long-term view on the issue.

The nodal Ministry had circulated to other ministries the proposal of swap ratio of 1:1.25 for their views before taking it to the Cabinet Committee on Economic Affairs (CCEA). For every one share of IBP, 1.25 shares of IOC would be allocated.

The Finance Ministry, in its response, has voiced concern that the proposal needed a review, as it was not favourable to the Government.

Regarding the concern of the Finance Ministry that IBP was overvalued in the merger and that it would result in a loss in Government's stake in IOC following the merger, the sources said IBP's share value has come down as marketing companies were reeling under the impact of the highly volatile international oil market.

Currently, the Government's stake in IOC is 82.03 per cent with the rest being held by public, financial institutions and foreign institutional investors. By the end of March 2005, IOC held 53.58 per cent stake in IBP with FIIs, banks, mutual funds and the public holding the rest. The boards of the two companies approved the merger proposal in the middle of 2004 and the swap ratio was announced in December.

Only after getting the CCEA nod the Company Law Board will be approached for granting legal sanctity to the proposal.

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