Divesting the block deal: EGoM to price 10% IOC shares to be sold

 

New Delhi: Empowered Group of Ministers (EGoM) shall on Saturday decide the price at which 10% shares of Indian Oil Corporation are to be divested. The panel of ministers shall be headed by Finance Minister P Chidambaram. ONGC and OIL shall each buy 5% stake in IOC.

 

The 10% shareholding in IOC to ONGC and OIL shall be offered at a discount of about 10% to the current price. ‘The EGoM on IOC disinvestment will meet tomorrow to decide on price of sale to ONGC and OIL’, an official said.

 

Earlier this week, the board of PSU Oil India Ltd (OIL) approved the acquisition of a 5% stake in IOC at a discounted market price. At a 10% discount to the current price, the government's sale of 24.27 crore shares (or a 10% stake) in state-owned IOC would fetch over Rs. 5,400 crore.

 

On 16 January, the EGoM on disinvestment cleared the stake sale in the nation's largest oil firm through a block deal. IOC shares have gained more than Rs. 35 apiece since then. EGoM then cleared the stake sale at current market price, plus/minus 1%.

 

ONGC and OIL, however, wrote to the Petroleum Ministry saying they would each buy a 5% stake in IOC at the 6-month-average traded price and not at the current rate. ONGC currently holds an 8.77% stake in IOC.

 

Although the Cabinet had originally cleared the stake sale in IOC through an offer for sale, the Finance Ministry had to go in for the block deal route after opposition from the Petroleum Ministry.

 

A trade with a minimum 5 lakh shares or a minimum value of Rs. 5 crore executed through a single transaction on a separate window of a stock exchange constitutes a block deal. A block deal order for a scrip should be within a range of 1% from the ruling market price (last traded price).

 

The oil ministry had argued that IOC shares should not be sold through an offer for sale as the current price did not reflect the right valuation of the company.

 

IOC shares closed at Rs. 247.95 on the BSE on Thursday, up 0.20%, valuing the company at Rs. 60,201 crore.

 

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