Govt limits sale of IOC stake in ONGC, GAIL

The ministry is expected to shortly give its approval to IOC for this limited sale of its equity in ONGC and GAIL. ‘‘IOC will be able to raise around Rs 2,500 by this sale,’’ the officials said.

‘‘Offloading of shares by IOC by these levels would help improve the liquidity of ONGC and GAIL scrips in the market. The government’s decision to limit the sale of IOC’s equity in ONGC and GAIL is because the stock market may not have the appetite to absorb an issue of this size,’’ ministry officials said.

Company sources revealed that IOC has planned this sale by issuing exchangeable bonds in global markets having an initial lock-in-period. ‘‘At the end of the lock-in period, the investors will have the option to either convert the bonds into equity at a fixed price at the time of issue or redeem the bond,’’ they said.

It is significant to point here that this is for the first time that the bonds are being issued for the secondary sale of equity of IOC’s holdings in GAIL and ONGC. The exchangeable bonds for ONGC and GAIL shares will be the first such issue in the secondary market by an Indian corporate. The issue will be floated at a premium which is expected to be around 30 per cent the price prevailing at the time of the issue.

IOC had, in 1999, acquired 9.6 per cent government stake in ONGC for Rs 2,225.15 crore and 4.8 per cent government equity in GAIL for Rs 245.04 crore as part of the cross-holding scheme formulated by the then finance secretary Vijay Kelkar.