The Centre on Friday approved the stake sale of Indian Oil (IOC) and Bharat Heavy Electricals (BHEL) to other public sector companies, a move that will add more than Rs 7,300 crore to the government’s disinvestment kitty and help it to stick to the recently revised fiscal deficit target of 4.6% of the GDP.
The EGoM also cleared a 5% stake in BHEL to Life Insurance Corporation of India (LIC), which will fetch the exchequer about Rs 2,046 crore. LIC already holds a 6.03% stake in BHEL.
Both the sales would be concluded by March. A stake of 10% in IOC, or 24.27 crore shares, will be sold to ONGC and Oil India (5% each) at a 10% discount through an off-market transaction. This will fetch about Rs 5,300 crore to the exchequer. ?The two companies (ONGC and OIL) will now work out the deal and the stake sale will happen very shortly. It should be happening in the next few days. The government advises the board and the two boards will meet and decide. It will be an off-market deal,” oil secretary Vivek Rae told reporters after the EGoM meeting on Friday. The EGoM on disinvestment is headed by finance minister P Chidambaram.
IOC shares have gained more than Rs 37 apiece since January 16, when the EGoM on disinvestment cleared the stake sale in the nation’s largest oil firm through a block deal. The EGoM had 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 six-month average traded price and not at the current rate.
The government then decided to offer the IOC shares at 10% discount to current market price to the companies through an off-market deal.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.
?BHEL disinvestment will happen this fiscal through a block deal to LIC,” disinvestment secretary Ravi Mathur told reporters.
The department of heavy industries, the administrative ministry of BHEL, has for long opposed the disinvestment, citing unfavourable market conditions.As per the revised estimates in the interim budget, the disinvestment target was lowered to Rs 16,027 crore in this financial year from Rs 40,000 crore.
