The government would be able to mobilise only Rs 5,300 crore by offloading 10 per cent stake in the state-run Indian Oil Corporation (IOC) owing to uncertainties on under-recoveries and likely introduction of export parity pricing,the petroleum ministry has cautioned.
The Union Cabinet is likely to consider a proposal for sale of 10 per cent of official stake in IOC through the offer-for-sale (OFS) route on Thursday. At present,the government holds a 78.92 per cent stake in IOC. In a note to the department of disinvestment (DoD) last week,the oil ministry said that the proposed 10 per cent disinvestment in the oil marketing company may result in garnering about only Rs 5,300 crore as against Rs 10,000 crore envisaged by the government.
This is because the PSUs share price has slided to Rs 220 from Rs 425,when the stake sale was attempted in 2010. Even at that point of time the disinvestment exercise had to be called off because crude prices started rising leading to corresponding rise in IOCs under-recoveries,the ministry contended.
Continued uncertainty over under-recoveries and delayed receipt of cash compensation from the finance ministry have adversely impacted the valuation of IOCs scrip,the petroleum ministry pointed out. This has raised investors concern over the profitability and certainty of IOCs revenues, it told the DoD. Another crucial factor impacting investor-sentiment is the possibility of introduction of the export parity pricing (EPP),which has reduced the companys share price to Rs 220. EPP is likely to further depress IOCs scrip and also raise concerns over marketing entry by other private players, the ministry headed by M Veerappa Moily said.
These factors have rendered IOCs share price unattractive for disinvestment,the ministry said. The DoD has already selected five merchant bankers Citibank,HSBC,UBS Securities,SBI Capital and J M Financial to manage the stake sale of the oil major. IOC,the nations largest refiner,has a market capitalisation of Rs 54,519 crore. It posted a net profit of Rs 5,005 crore in 2012-13,up from Rs 3,954 crore in the previous year. In 2013-14,IOC is expected to incur under-recoveries of Rs 67,000 crore on sale of diesel,domestic cooking gas and kerosene.