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ONGC's follow-on public offer (FPO) will not hit the market in the first week of April, as was planned.
The Centre's plan to sell 5 per cent stake in ONGC through the FPO has run into rough weather owing to Board composition issues.
The Government is looking to mop up at least Rs 12,000 crore from the stake sale.
Indications are that the FPO will hit the market only in the second quarter of 2011-12, although ONGC is confident that issues relating to appointment of independent directors would get soon sorted out and that the stake sale could happen in first quarter itself.
The main issue that is coming in the way of filing of the red herring prospectus is the shortage of independent directors on the ONGC's Board.
For the managers of the FPO to file the RHP with SEBI, the company has to comply with the listing agreement (clause 49) that requires a company with an executive chairman to have equal number of functional and independent directors on its Board. There is a shortage of minimum three independent directors and ONGC cannot go to the market without the required number of independent directors, official sources said.
What has complicated the process of appointment of independent directors is a change at the helm of the Petroleum Ministry. With a new Petroleum Minister, Mr Jaipal Reddy, taking charge recently and some retirement related changes in the ONGC Board itself, the approach of the Government in deciding the names and number of independent directors had undergone a change.
The Government has now dropped a proposal of withdrawing its nominee directors so as to push the FPO through.
After the FPO, the Government stake would come down to 69.14 per cent from 74.14 per cent.
Currently, there are two government nominees on ONGC Board. The ONGC Board has six functional directors besides the Chairman.
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