Higher quota for retail investors in ONGC disinvestment

The disinvestment process to be finalised for ONGC will have higher quota for retail investors that too at a discount.

The Government proposes to divest 5 per cent out of its 68.94 per cent shareholding in ONGC through the auction mechanism, or offer for sale (OFS).

It will be the first sale after the market regulator on June 19 allowed minimum reservation for retail investors in the OFS mechanism.

The SEBI norm requires that minimum 10 per cent of the issue size shall be reserved for retail investors – for those bidding for less than ₹2 lakh.

The new provision also talks about discount for the retail investors.

This will be ONGC’s second OFS.

Senior officials of the key ministries, including the Finance Ministry, are set to meet to finalise the mechanism.

The Department of Disinvestment officials are also meeting on Monday to decide on the bank/bankers who will take the process ahead – 14 merchant bankers and five legal firms will make presentations.

The Cabinet Committee on Economic Affairs is expected to take it up on August 27.

OFS as a concept was introduced in 2011-12, and ONGC was the first company to dilute stake under this mechanism.

The current proposed offer consists of over 42.77 crore shares.

Based on Friday’s closing price of ₹426.85, the Government can mobilise over ₹18,200 crore.

Meanwhile, to avoid a repeat of the embarrassment faced in the first OFS in 2011-12, where State-run insurer Life insurance Corporation of India had come as a saviour, ONGC wants the Government to clear its position on fuel subsidy sharing and natural gas pricing.

A senior ONGC official told BusinessLine that to realise the true value of the company, it is important that the Government clarifies on the two issues.

Last fiscal, the company’s total subsidy payout was ₹56,384 crore, and for the first quarter of the current fiscal, the subsidy burden stood at ₹13,200 crore.

Aware of this concern, even the Ministry for Petroleum and Natural Gas has been seeking clarity on the subsidy mechanism from the Finance Ministry.

As part of the burden sharing mechanism to offset the losses incurred by the public sector oil retailers, ONGC, along with Oil India and GAIL (India), has to sell crude oil and petroleum products to the retailers at a discount.

Besides the issue of subsidy sharing, a sustainable gas pricing policy is needed.

The Government hopes to have in place new gas pricing by the end of September.

The Government has fixed a target of ₹63,425 crore to be raised through divestment, which includes ₹43,425 crore through selling minority stakes in public sector companies such as ONGC, Coal India, SAIL and NHPC; ₹15,000 crore through residual stake sale in companies such as Bharat Aluminium Company and Hindustan Zinc; and ₹5,000 crore through others.

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