The Hindu Business Line : ONGC decides against special dividend

ONGC, during its board meeting on October 26, decided that it would not be able to pay a special dividend based on the cash reserves, as it has already chalked out investment plans and has also hired credit rating agencies for overseas borrowings.

New Delhi , Nov. 3

THE Finance Ministry may have to look beyond ONGC to generate additional revenue.

The company's board has said that it would not be able to consider declaring a special dividend, as it does not have surplus funds. It, however, would be able to consider paying an interim dividend at an appropriate time, a senior ONGC official said.

The company was asked by the Petroleum Ministry to consider paying special dividend following a missive by the Finance Ministry.

In keeping with good corporate governance practice, the issue was taken up at the company's board meeting held on October 26, the official told Business Line.

After due deliberation, it was decided that ONGC would not be able to pay a special dividend based on the cash reserves, as the company has already chalked out its future investment plans and has also hired credit rating agencies for overseas borrowings, he added.

At a meeting held on Wednesday, the company informed the Petroleum Ministry that it will have cash reserves of about Rs 700 crore in the form of deposits by the end of March 2007 as per the budget, and has borrowings of about Rs 800 crore, the official said.

This in effect leads ONGC to a square-off position due to which the company would not be able to fork out special dividend, he added.

Besides the increased capital expenditure, the company also has to account for a huge subsidy outgo.

The net profit for the second quarter stood at Rs 4,138 crore after subsidy payout of Rs 2,827 crore to downstream companies, in compliance with instructions from the Government during the quarter. For the April-September 2005 period, the subsidy payout to downstream companies stood at Rs 5,701 crore.

During this period, ONGC also paid out Rs 5,182 crore (Rs 4,850 crore in the same period last year) to Central and State Governments by way of royalty, cess, excise duty, NCC duty, and sales tax.

The official also said that the company's dividend payment is higher than what has been prescribed for oil PSUs. They are expected to pay 30 per cent of the profits, while ONGC had paid almost 40 per cent.

The dividend is decided on the average of the last three years. ONGC had declared a total dividend of 400 per cent in 2004-05 including an interim dividend of 200 per cent in the third quarter of 2004-05.

The special and interim dividends are expected to help the Government generate around Rs 4,000 crore from the public sector companies during the current fiscal.

On Wednesday, the ONGC scrip closed at Rs 930.15 at the NSE.

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