Unless state-owned Life Insurance Corporation comes to the rescue, Indian Oil Corporation’s (IOC) R4,824-crore share sale could come a cropper. IOC’s roadshows across the globe — Hong Kong, Singapore, New York, Boston and London — have seen a less-than-lukewarm response with investors concerned about mounting losses in the wake of the government’s inability to control runaway fuel subsidies. At Tuesday’s closing price of R201 per share, IOC’s 10% stake was worth R4,824 crore.
Sources said top fund houses including T Rowe Price, Schroeder, Aberdeen, JPMorgan, Templeton, Wellington and Jardine showed little interest in the IOC offer. “Some did not even give the Indian delegation an appointment to discuss the offer. A few hedge funds and small fund houses showed interest in the offer but none of them were big names,” the source, who participated in the roadshows, said.
Other investors like the GIC met the delegation more as a courtesy call, sources said. As many as 19 investors in Hong Kong and Singapore and about 17 in the US are understood to have been approached. The government had earlier reportedly called off a roadshow in Dubai owing to low investor appetite.
Among other big-ticket divestments this fiscal is a 10% stake sale in Coal India estimated to fetch R16,000 crore. While opposition from trade unions has forced the government to reduce the sale to 5% of the company’s equity, a similar amount could come from a share buyback by CIL. The modalities of this have not yet been settled.
The R14,000 crore to be got by the residual stakes in Balco and Hindustan Zinc has got stuck in a dispute over whether Parliament’s approval is required for selling the HZL stake since the company was formed through an act of Parliament.
In which case, the government may have no option but to sell a part of the shares of ITC, Axis Bank and Larsen & Toubro, held by SUUTI and valued at roughly R40,000 crore. So far this fiscal, just R1,325 crore has been raised through disinvestments.
Investors feel the current revenue model for IOC is uncertain owing to the lag in subsidy compensations and the unclear road map for the deregulation of diesel.
Delayed compensations have led to huge borrowings and interest burden on oil retailers. Oil retailers including IOC currently incur Rs 9.58 per litre loss on diesel, Rs 35.77 a litre on kerosene and Rs 482.50 per 14.2-kg LPG cylinder.