IOC to pick up 26% equity in EIL

Asked about the price at which IOC would buy the stake in EIL, corporation sources said, “it would depend on the market price of EIL shares.” The EIL scrips closed at Rs 390 on the Bombay Stock Exchange (BSE) yesterday.

According to investment banking sources IOC would have to shell out about Rs 200 crore to buy 26 per cent government shares in EIL. After the divestment, government holding in EIL would come down to 61.5 per cent from the current level of 87.5 per cent. Financial institutions and public hold the rest 12.5 per cent in EIL.

IOC’s move to pick up stake in EIL comes in the backdrop of the recommendations made by the Disinvestment Commission to divest government shares of EIL to a strategic partner.

The equity will enable IOC to have more strength in the area of refinery as this area contributes around 50 per cent of EIL’s total business. The acquisition would also help IOC strengthen its engineering and technological capabilities and assist its on-going operations as well as new projects, IOC sources said.

The Disinvestment Commission had also suggested that EIL should have a strategic alliance partner and also offload its equity to other oil undertakings. The commission in its fifth report had recommended a mix of disinvestment modalities including offering equity up to 10 per cent to other public sector oil companies as also to Steel Authority of India Ltd (SAIL), Gas Authority of India (GAIL) and National Thermal Power Corporation (NTPC), due to EIL’s expertise in providing services to these companies.

The company had reported a turnover of about Rs 311 crore and posted a profit after tax of more than Rs 73.2 crore in 1997-98 and the paid up capital stands at Rs 18.7 crore.