New Delhi: State-owned Oil and Natural Gas Corp (ONGC) has informed the government that it will buy 5 percent stake in Indian Oil Corp (IOC) at six month average trading price and not at current market rates.
The Board of ONGC a few days back deliberated on the offer to buy half of the 10 percent stake that the government wants to disinvest in IOC, sources with direct knowledge of the development said.
It, however, felt that IOC scrip has shot up by over 14 percent since the time the government made the offer and so it would be better to do an off-market trade based on six-month average share price.
Sources said a similar view has also been taken by the board of Oil India Ltd (OIL) which is to buy the remaining 5 percent stake of the government in the oil marketing company.
Both the boards expressed willingness to buy IOC stakes, they said.
The two companies have in writing told the Oil Ministry of their condition for purchase of 24.27 crore shares at a six month average rather than the EGoM approved rate of current market price, plus/minus one percent, they added.
Oil Secretary Vivek Rae said the 10 percent stake will be split equally between ONGC and Oil India.
"ONGC and Oil India boards are working on stake buy in IOC. The cross holding in IOC will happen in few days," he said refusing to give more details.
The government expects to raise between Rs 4,800-5,000 crore through its 10 percent stake divestment in IOC.
IOC shares gained 14.24 percent or Rs 30 apiece since January 16, the day the Empowered Group of Ministers (EGoM) on disinvestment cleared the stake sale in the refiner through block deal.
A trade, with a minimum quantity of 5 lakh shares or minimum value of Rs 5 crore executed through a single transaction on a separate window of a stock exchange constitutes a block deal.
Block deal order for scrip should be within range of (+/-) 1 percent from the ruling market price (last traded price).
ONGC already holds 8.77 percent stake in IOC.
IOC stake sale will make up for more than one-tenth of the disinvestment target of Rs 40,000 crore fixed for current fiscal. So far, government has raised about Rs 3,000 crore through this route.
The Cabinet had originally cleared 10 percent stake sale in IOC through the Offer For Sale (OFS) route. However, the Finance Ministry had to finally resort to the block deal route on account of stiff opposition from its Petroleum counterpart.
The oil ministry was of the view that the IOC shares should not be sold at the current prices as they do not reflect the right valuation of the company.
First Published: Tuesday, February 4, 2014, 20:15