The Hindu Business Line : Liquidity position of oil marketing cos improves

Offloading bonds
IndianOil sold Rs 7,250-cr worth of bonds June, to sell Rs 3,000-cr worth
HPCL sold about Rs 1,600-cr worth bonds, to sell Rs 4,000-cr worth in July

Mr S.V. Narasimhan

Pratim Ranjan Bose

Kolkata, June 23 The Reserve Bank of India’s decision to allow the oil marketing companies to trade in oil bonds via special market operations and offer much needed foreign exchange has reportedly brought a reasonable change in the liquidity position of public sector oil marketing trio — IndianOil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd.

According to sources, all three companies have made a beeline to clear the stock of bonds — considered as a near-illiquid asset till the RBI directive came on May 31 — within July. The deal appears to be doubly sweet to the companies as they are now selling bonds at 2-3 per cent discount, compared to as high as 8-9 per cent discount till May this year.

As a net impact, the three companies have stopped raising fresh loan finances and are expected to bring down the total borrowings during this quarter and bring a marginal improvement in the debt-equity ratio, which was hovering between 1:1 and 1:1.5 in April. The three companies witnessed 40-60 per cent increase in total borrowings in 2007-08 to meet the cash requirements.

Soon after the RBI notification, IndianOil, the biggest of the three companies, offloaded Rs 7,250 crore worth of bonds in a gap of just 10 days this month. This was over and above the Rs 4,300-crore worth of bonds sold in April at heavy discounts.

According to the Director (Finance), Mr S.V. Narasimhan, the company will offload Rs 3,000-crore worth of more bonds within a month to clear its entire stock of “saleable” bonds.

The residual Rs 4,000 crore of bonds will continue to be placed under collateralised borrowing and lending obligation of the Clearing Corporation of India for call money operations.

IndianOil has not made any fresh borrowing in June and is expected to bring down total borrowings by nearly Rs 2,000 crore from approximately Rs 37,000 crore in June-end.

“A window to offload bonds at low discounts and in exchange of foreign currency has brought a substantial change in the liquidity condition,” Mr Narasimhan added. It may be mentioned that till the apex bank directives OMCs (oil marketing companies) were allowed to offload only 25 per cent of the available bonds in a quarter.

“There is a sea (of) change in the liquidity situation,” Mr B. Mukherjee, Director (Finance) of HPCL, told Business Line. The company has offloaded approximately Rs 1,600-crore worth of bonds in June and another Rs 4,000-crore worth will be offloaded by mid-July. “Our borrowings have remained at the April 2008 level,” Mr Mukherjee added.

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