Debt-ridden national oil company Oil & Natural Gas Corp (ONGC) has said that it would either buy back government shares in the company or pay interim dividend. Not both, as it needs time to build a corpus for the payout. “Due to the existing legal framework, ONGC has to finance the buyback through internal resource accruals instead of loans borrowed from banks or financial institutions. Hence, ONGC requires time up to mid-December for arranging the internal resources,” it informed the Finance Ministry.
“ONGC will then have to substantially defer the interim dividend for current (fiscal) year and shift the same to final dividend payable in the next financial year,” it wrote. Sources said the Ministry is yet to communicate which of the two routes it wants ONGC to follow. ONGC is one of the three oil companies identified by the Ministry’s Department of Investment and Public Asset Management (Dipam) for government share buyback to meet the Ministry’s divestment target of Rs 80,000 crore. The exploration firm has to buy back 3 per cent of the government-held shares for which it requires Rs 4,826 crore. Last fiscal year, on government instructions, it paid interim dividend twice amounting to 105 per cent or Rs 6,736 crore.
The other two — national oil company Oil India Ltd (OIL) and oil refining and marketing Indian Oil Corp (IOC) — were directed to buy back 5 per cent each. Citing poor liquidity and other financial liability, ONGC in August sought an exemption from the buyback saying it needed money to service the unsecured loan of Rs 25,592.21 crore that was taken to partially fund purchase of gas assets of Gujarat State Petroleum Corp (GSPC) as well as state-run refining and marketing company Hindustan Petroleum (HPCL).
However, the Committee on Management of Government Investment in Central Public Sector Enterprises refused to exempt ONGC and suggested that the latter could borrow from the market for the purchase.
Subsequently, ONGC quoted Rule 17 of the Companies (Share Capital & Debenture) Rules and Section 4 of the SEBI (Buyback of Securities) Regulation which do not allow a firm to borrow money from banks or financial institutions for the purpose of buying back its shares. Since the buyback could only be through internal accruals, ONGC argued that it would have to “defer the interim dividend for the current fiscal year and shift it to next financial year along with payment of final dividend”.
It said that it needed 45 days’ time from the date of Board approval to generate the internal accruals to buy back three percent out of the 67.45 per cent shares held by the government. On October 31, it informed the Bombay Stock Exchange of fixing November 16 as the Record Date for paying interim dividend, if any. However, on November 3 the ONGC Board withdrew the Record Date since it did not get any feedback from the Finance Ministry.