The Government plans to offload a portion of its stake in ONGC by the first week of November. The move is expected to speed up the Government’s disinvestment programme, which has been hanging fire for sometime now.

Despite approvals, not a single disinvestment took place in the first six months of the current fiscal year.

ONGC’s disinvestment follows the recent decision to hike the price of domestically produced natural gas and deregulation of the retail diesel price. These decisions will have a significant impact on the balance sheet of ONGC and brighten its prospects for a better valuation. On Monday, ONGC’s shares ended 5 per cent higher, at ₹418.85.

“Keeping valuations in mind, this is the right time to divest in ONGC,” a senior Finance Ministry official said while adding that the Disinvestment Secretary was holding meetings with merchant bankers in this regard.

The Government aims to sell 5 per cent of its 68.94 per cent holding to the public. The method will be offer-for-sale through stock exchange (OFS) or the auction method. The retail investor will not just get the benefit of a minimum 10 per cent reservation in total shares offered, but will also be offered discounts.

Experts believe that with higher natural gas prices ($5.61/mmbtu from $4.2/mmbtu), ONGC is expected to add another ₹1,950 crore to its net profit in the remaining five months of the current fiscal as the gas price revision will come into effect from November 1. Net profit is estimated to go up by ₹4,700 crore on an annualised basis.

Savings expected Similarly, diesel price deregulation would mean savings for ONGC, as it will not have to share the subsidy burden. ONGC, along with Oil India and GAIL, shares the subsidy burden to offset losses incurred by public sector oil marketing companies for selling diesel, LPG and kerosene at a controlled price.

In 2013-14, ONGC compensated 48 per cent of the total under-recovery. In the first quarter of the current fiscal year, it paid ₹13,000 crore, while the payout for the second quarter is not yet known. A senior ONGC official said that it is yet to ascertain how much the company will save on account of the diesel price deregulation. However, based on last year’s mechanism, it could save up to ₹15,000 crore this year.

Other PSUs Apart from ONGC, the Government has approved disinvestment in Coal India, SAIL, NHPC, Hindustan Aeronautics Limited and Rashtriya Ispat Nigam besides the sale of its residual stake in Hindustan Zinc and Balco. In all it hopes to mobilise ₹58,425 crore in this fiscal year.

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