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IOC may make presentation to Oil Ministry on IBP merger

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Richa Mishra

New Delhi, Nov. 2

IOC is to make a fresh presentation before the Petroleum Ministry on the proposed merger of IBP Co Ltd with itself.

Though the Union Cabinet had given its in-principle nod for the merger, it had expressed reservations on the proposed swap ratio requiring IOC to make a fresh presentation.

A senior IOC official said there could be a fresh presentation on the clarifications sought by the Cabinet. However, indications are that the company will defend the proposed swap ratio for the merger of IBP with IOC.

The current swap ratio proposed by the boards of both the companies was 125 shares of IOC for every 100 IBP shares.

The Cabinet had on October 20 had given its in-principle nod for the merger.

The Finance Ministry had raised questions on the swap ratio on the grounds that IBP had been over-valued. It had held that the merger would result in the reduction of the government stake in IOC. This had made the Petroleum Ministry ask IOC to get a second opinion.

Currently, the Government's stake in IOC is 82.03 per cent with the remaining being held by the public, financial institutions and foreign institutional investors. At the end of March 2005, IOC held a 53.58 per cent stake in IBP with foreign institutional investors, banks, mutual funds and the public holding the rest.

In the merger proposal, the Petroleum Ministry had suggested the creation of a trust. The proposed trust is expected to be similar to the Petroleum Trust created by Reliance Industries while merging Reliance Petroleum with itself. This merger route will help IOC avert the losses on its books.

The merger plan has been designed to enable IOC to avoid booking losses on its investment in IBP.

Meanwhile, IOC was back in black in the second quarter ended September 30, 2005 posting a net profit of Rs 949.72 crore, after recording a loss in the first quarter of this fiscal. But the profits saw a sharp dip of 23 per cent compared with the same period last year.

IOC's subsidiary IBP losses went up by 212.9-per cent at Rs 190.53 crore during the second quarter of the current financial year against a loss of Rs 60.89 crore during the same quarter last fiscal.

The IOC shares on Wednesday closed at Rs 453.55 and IBP closed at Rs 498.45 at National Stock Exchange (NSE).

(This article was published in the Business Line print edition dated November 3, 2005)
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