The Hindu Business Line : PSU oil firms prepare to invest surplus in equity oriented MFs

New Delhi, Feb. 18 Public sector oil companies such as ONGC and Indian Oil Corporation Ltd (IOC) are readying themselves for investing their surplus funds in equity oriented schemes of mutual funds.

While ONGC has already submitted its policy framework to the Ministry of Petroleum & Natural Gas, IOC is working on a draft policy which would lay the guidelines to be adopted by it for such investments.

Currently, the refinery-cum-retailing major, IOC, has no surplus funds as the company’s profitability has been squeezed due to selling petroleum products — petrol, diesel, kerosene and cooking gas — below the cost price. The company’s total borrowings is expected to be in the band of Rs 30,000-Rs 34,000 crore during this fiscal, which is likely to increase in the next two years to part-finance higher capital requirement.

However, keeping in view the revised guidelines of the Department of Public Enterprises (DPE), IOC has recently sought approval of its Board on the draft policy. The revised DPE guidelines envisaged that for the purpose of such investments, the procedure and management control systems have to be decided by the Central Public Sector Enterprises (CPSE) concerned in consultation with the administrative ministry.

Existing policy

As per existing investment policy, the companies can invest in debt-based units/scheme of UTI only. However, the revised guidelines allow CPSEs to invest in debt and/or equity-oriented schemes of all public sector SEBI-regulated mutual funds.

Speaking to Business Line, Mr S.V. Narasimhan, Director (Finance), IOC said, the revised DPE requirements envisage investments in public sector mutual funds not exceeding 30 per cent of the available surplus funds of a company.

“With the guidelines in place, the company is planning to keep itself prepared for any such future investments, as and when surplus funds are available,” he said.

Besides, investments in mutual funds will give higher and better returns, Mr Narasimhan added.

Proposed plan

The proposed policy of IOC would stipulate the appointment of a consultant, identification of surplus funds, quantum of investments in mutual funds, and identification of mutual fund scheme for investments.

At present, IOC’s Chairman and Director of Finance are empowered by the board to invest surplus funds of the corporation, subject to an overall ceiling of Rs 3,000 crore, in a financial year. The company board has also considered that this limit may include investments in mutual funds.

The draft policy will be sent to the nodal ministry and subsequent to its approval, the board’s consent will be taken for execution of the policy.

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