Reliance Prospective IndianOil stake sale now as share price is low

Says divestment should be at a better price, EGoM to take up the issue on Thursday

In a sign of differences between the petroleum ministry and the finance ministry over divestment of equity in Indian Oil Corporation (IOC), Petroleum Minister M Veerappa Moily on Monday said he was against giving away the shares at a "throwaway price".

 

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An Empowered Group of Ministers (EGoM) is to take up the issue on Thursday.

 

"It (divestment) should be at a better price and the EGoM would decide whether to go for disinvestment or not," Moily told the media on Monday.
The EGoM is headed by Finance Minister P Chidambaram. The ministry of petroleum and natural gas had raised its concerns against going for disinvestment thrice in the previous two months, following a lukewarm response from investors after presentations in India and abroad.

 

 

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The government aims to disinvest 10 per cent in the company by mid-January. The domestic roadshows, in Mumbai and Chennai, had faced stiff criticism over the timing for the stake sale. Those in the UK, the US, Hong Kong and Singapore failed to attract the interest of major international investors.

 

On the other hand, with only three months to go for the financial year to end, the IOC stake sale is important to achieve the year's disinvestment target of Rs 40,000 crore. The government had 78.92 per cent stake as on June 30.

 

"The shares are at an all-time low. A decision on whether to do the divestment this financial year or the next, waiting for a higher price, would be taken by the EGoM," a senior petroleum ministry official told Business Standard.The ministry had already informed the finance ministry, which is keen to go ahead with the sale plan, that as the shares of IOC touched a high of Rs 430 in late 2009 and last year's 52-week high was Rs 375, "the realisation now would be less by Rs 4,225 crore as compared to the stage when disinvestment was announced in January last year".

 

The department had already fixed five merchant bankers - HSBC, UBS Securities, SBI Capital, JM Financial and Citibank - to manage the sale process. The company has a current market capitalisation of Rs 49,627 crore. IOC shares closed 0.5 per cent up on Monday at Rs 204.4 on the BSE exchange.

 

During the international roadshows, major funds such as JPMorgan, Templeton, T Rowe Price, Wellington Management, Aberdeen Asset Management and Schroders would not meet the IOC team or did not show any interest.

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