The Hindu Business Line : ONGC faces threat of delisting

With Petroleum Ministry’s attempts to seek time from Securities and Exchange Board of India for appointment of independent directors on board of PSUs, including ONGC, failing, the exploration and production major has not only attracted penal provisions for non-compliance of corporate governance norms, but also faces the threat of delisting.

According to a senior company official, “the Government needs to resolve the issue at the earliest. The matter is between the Ministry and SEBI, as the independent directors on Board of PSUs are appointed by the nodal ministry.”

Non-compliance

An adjudication proceeding has already been initiated against the company for non-compliance of Clause 49 of the Listing Agreement, which stipulates that at least 50 per cent of the board should comprise independent directors.

Non-compliance with listing agreement can invite a fine of up to Rs 25 crore. Besides, stock exchanges can suspend the dealing or trading of the securities of the company.

To comply with SEBI requirements, ONGC needs five more independent directors, a senior company official said. Currently, the company board constitutes seven whole time directors (this includes soon-to-be-appointed director finance), four independent directors and two Government nominees, taking the total number to 13. However, if the parameter of one-third of the board is taken, then ONGC would require just one more such director, the official said.

ONGC’s article of association prescribes for 22 members on Board.

Mr R.S. Sharma, Chairman and Managing Director, ONGC, told Business Line that unlike the private sector, accountability is higher in PSUs as they are highly regulated, thus there is no need for requirement of 50 per cent independent directors on board.

"A PSU not only has Government nominees on board, but is also answerable to authorities like CAG, CVC, RTI and Committee on Public Undertaking. Besides, a PSU also faces Parliamentary accountability."

The state-owned upstream company has a market capitalisation of about Rs 2,76,000 crore. This is second to only private sector major Reliance Industries Ltd in India. An enterprise value is determined on the basis of oil and gas reserves of a company and is equal to the market capitalisation about $70 billion for ONGC divided by proven reserves - 8 billion barrels of oil and oil-equivalent of gas in the case of ONGC.

Adding value

GAIL (India) Ltd, Chairman and Managing Director, Mr U.D. Choubey, said, "The issue is between the Ministry and SEBI. We have seen the existing three independent directors adding value to the company. Even three are serving the purpose. The objective is to maintain good corporate governance."

GAIL, currently, has six functional directors, two Government nominees, and three independent directors, taking the total to 11. The company requires five more independent directors to meet the SEBI requirement.

Related Stories:
Can independent directors help improve corporate governance?
SEBI proceeds against 20 cos for not complying with Clause 49 norms
Clause 49: ONGC may be asked to convene EGM
Clause 49 compliance is Govt's problem: Raha

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
D1 Oils targets 3.5 lakh hectares jatropha plantations

Furniture imports surge on growing demand

Anil Ambani writes to PM, slams GSM operators' claims on spectrum

A tale of two ‘low’ inflation episodes

Fine-print of RBI’s macroeconomic analysis

3-year scorecard: Tax-saving schemes post 48% return

Container handling rates — A new approach to tariff-setting

ONGC faces threat of delisting

Today's Pick: GMR Infrastructure (Rs 209.80)

Satyam plans Rs 800-cr investment in Tamil Nadu

Arun Bajoria raises stake in Accel Frontline to 10%

Inflation risks, fall in growth may support gold

Sentiment turns cautious

P-Notes: SEBI measures have some impact on FII investments