The Hindu Business Line : IOC offloads 50 pc of its stake in GAIL

IOC, which has been suffering a pinch on its bottom line primarily due to non-realisation of market-related prices for petrol, diesel, kerosene under public distribution system (PDS) and domestic liquefied petroleum gas (LPG) during the current fiscal, has sold half of its stake in GAIL to repay debts and raise money for expansion plans.

Sale details

The company sold its stake in GAIL for Rs 561 crore to various domestic and overseas financial institutions including Life Insurance Corporation and ICICI Prudential. It sold 2.04 crore shares at Rs 275 per share, which represents 2.41 per cent shareholding of GAIL. IOC had bought GAIL shares in 1999 at Rs 60 per share, thus making a profit of almost Rs 215 per share.

Company official said the sale would help to retire IOC's Rs 18,960-crore market borrowings and raise money for expansion plans. The company had received its board's approval in December last year to offload 20 per cent of its holding in ONGC and 50 per cent of its stake in the gas transmission company GAIL.

Before offloading, IOC held 4.08-crore equity shares or 4.83 per cent in GAIL. It also has 13.7-crore equity shares or 9.61 per cent stake in ONGC. JM Morgan Stanley and Citi Financials were the two merchant bankers for the sale of its shares in ONGC and GAIL.

The company had registered a net loss of Rs 5.83 crore for the third quarter of the current financial year ended December 2005, against a net profit of Rs 1,286.76 crore for the same quarter in the previous year. For the nine months ended December 2005, the net profit was Rs 889.66 crore against Rs 3,998.46 crore for the same period of the previous year, a decrease of 78 per cent.

According to the IOC Chairman, Mr Sarthak Behuria, the lower profits were primarily due to non-realisation of market-related prices for petrol, diesel, PDS kerosene and LPG (domestic) during the current fiscal, which increased to Rs 8,106 crore for the period April-December 2005 compared to Rs 6,496 crore in the corresponding period of the previous year. Mr Behuria has been maintaining that the stake sale would be market driven and not financial driven.

It would also depend on the profitability the company maintains and its share of oil bonds from the Government, which is expected to offset its under recoveries for selling the petroleum products below the cost price. The company is expected to take a hit of Rs 16,000 crore for the whole year in the current fiscal.

To divest 20% in ONGC

As regards offloading its 20 per cent stake in ONGC, Mr S.V. Narasimhan, Director (Finance) IOC, said the stake sale would be determined through a book building process depending upon the market price of ONGC.

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