On Monday, the stocks of ONGC closed at Rs 176.20. At current price, the stake may sale fetch the exchequer Rs 11,300 crore. And it is expected the Centre will likely sell a 5% stake in the country ’s largest oil explorer ONGC in what could be one of its largest disinvestment exercises in the current fiscal.
Last week in the US the department of investment and public asset management (DIPAM) held roadshows to reach out to potential investors for the proposed offer for sale (OFS) of the government’s stake in ONGC. According to the source, it has said that exact quantum of equity is to be offloaded and not yet decided and it could be 3-5%. While at last fiscal government has achieved the largest ever disinvestment revenue of Rs 1 lakh crores. Only Rs 9,220 crores have been collected so far, half the amount garnered by the same time frame last year.
This year the target is for Rs 80,000 crore. As per the official said, this year the disinvestment strategy is to push as many small stake sales as possible, keeping in mind appetite of investors and to avoid fluctuations in the market.
The Centre owns 67.45% in ONGC. Last year, ONGC had bought the Centre’s 51% stake in Hindustan Petroleum Corporation Rs 36,915 crores for helping boost the disinvestment receipts.
The Centre sold a 5% stake to raise Rs 12,750 crores. Since then, the Centre’s plan to sell more of its holding in the company floundered as the stock got hammered due to sharing of the government’s fuel subsidy burden.
The recent decision of the government to drop a plan to ask ONGC to resume sharing its fuel subsidy burden if the Indian basket of crude breaches $70 a barrel is a positive for the proposed stake sale. The subsidy sharing practice was discontinued in FY16. In FY15, nearly 60% the share of ONGC and Oil India in petroleum subsidy declined to 10% in FY16 and further to nil in FY17.
Besides ONGC, the pipeline of stake sales this year include a 5% stake sale in Coal India that could fetch close to Rs 9,100 crores at the current market price of Rs 292.60 per share. In June this year, DIPAM held roadshows abroad, this is done for the proposed of the OFS in CIL. Besides OFSs of ONGC and CIL, officials are hoping that a fresh tranche of an existing CPSE exchange-traded funds, as well as OFSs in other PSUs such as Indian Oil (3%) and Power Finance Corporation (10%), could fetch a substantial sum to achieve the Centre’s ambitious disinvestment target in FY19.