The Hindu Business Line : Cabinet panel clears 10% OIL sell-off

New Delhi, Aug. 30 Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd will acquire stakes in Oil India Ltd (OIL), with the Government deciding to shed 10 per cent of its holding in the exploration company in favour of the three State-owned oil marketing companies.

This, along with an initial public offer by Oil India, will reduce the effective Government stake in the company to about 78 per cent from the existing 98.13 per cent.

A decision to this effect was taken by the Cabinet Committee on Economic Affairs on Thursday. Briefing newspersons, the Finance Minister, Mr P. Chidambaram, said that “The CCEA gave its nod to the proposal of OIL for fresh equity of 10 per cent of its paid up capital through IPO. The CCEA also approved the proposal of issuing additional one per cent of its paid up capital to the employees of OIL. In addition to these two, the CCEA has approved disinvestment of 10 per cent of OIL’s paid-up capital in favour of IOC, HPCL and BPCL in the ratio of 2:1:1, respectively.”

Strengthening synergies

The disinvestment in favour of three oil marketing companies would not only strengthen their existing synergies but would also help them to raise resources by disposing these shares in the open market at an opportune time to tide over their under recoveries, he added.

Assuming that the net value is Rs 600 per share, the company would be raising about Rs 1,428 crore through the 10 per cent IPO, he said. “The price/band/floor price and offer price will be approved by the Empowered Group of Ministers constituted to decide the price for the sale of Government shares,” the Finance Minister said. The IPO would help OIL raise resources for its future expansion and growth.

OIL, the nation’s second largest State-run oil explorer, plans to offer 10 per cent stake to the public in an IPO and another one per cent to its employees in February 2008.

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