ONGC’s plan to buy back IOC stake gets Government nod

In what can be termed as a begining to the much discussed restructuring of oil PSUs, the Government on Wednesday approved ONGC’s plans ...

In what can be termed as a begining to the much discussed restructuring of oil PSUs, the Government on Wednesday approved ONGC’s plans to buy back its 9.6 per cent stake held by IOC. ONGC will have to pay IOC a sum to the tune of Rs 10,800 crore for the buyback of 13.7 crore equity shares.

As senior officials in the ministry told The Indian Express earlier, the proceeds, which will be garnerned by oil PSUs from the sell-off of cross holdings, can be used to buy out stake in other oil PSUs as part of the merger process. For example, after selling off ONGC’s stake, IOC can use the proceeds to buy out OIL, ministry officials had stated.

ONGC had earlier, in September, secured an approval at its AGM for amending the company’s articles of association for the buying back of the stake that IOC holds.

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Talking to reporters on Wednesday, Petroleum Minister Mani Shankar Aiyar said: ‘‘I am absolutely delighted. The decision is ONGC’s vote of confidence in itself. I endorse it.’’

ONGC’s buyback from IOC will shore up its earnings per share. IOC holds 13.7 crore of the 142 crore shares issued by ONGC. Considering that these shares will be extinguished, ONGC’s EPS based on its net profit for 2004-05 will move up to Rs 67.5 from Rs 61 currently.

IOC and GAIL have kicked-off plans to sell their holdings in exploration major ONGC, with the lock-in period for sale of shares coming to an end in September. GAIL also holds 4.8 per cent stake in ONGC.

According to Petroleum Minister Mani Shankar Aiyar, ‘‘ONGC’s decision is unravelling of a decision taken before I took over and I am not sure if ONGC was a willing participant to that decision.’’

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The Minister was referring to the 1998 decision of the NDA government, when the Centre, with the intent of filling its coffers, asked oil companies to create cross holdings.

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