This week you may spot some of the top executives of two leading PSUs Indian Oil Corp (IOC) and Coal India Limited (CIL) in the financial hubs of Hong Kong, Singapore and Australia. After wrapping up successful road shows in the US and the UK, government will organise road shows in Singapore and Hong Kong this week to gauge the appetite of the investors in bid to sell its 10-percent-stake in nation's largest oil company.
They will try and sell the IOC stake sale, which is important for achieving government's investment target of Rs 40,000 crore. The proposed issue of 19.16 crore IOC shares is likely to fetch as much as Rs 3,900 crore at current prices.
At the road shows last week, IOC was projected to investors as "The Future of India Energy." Such road shows are organised basically to apprise the prospective investors about the investment potential in the company. In the presentation meant for the investors, IOC was shown as the largest refiner in the country which has "Strong support from the Government of India" and is "Driven by a Management Team that has Delivered Results."
IOC has 10 refineries with 65.7 million tonnes of crude oil processing capacity, which constitutes 31 percent of the domestic refining capacity. It has 11,000-plus km of crude oil, product and natural gas pipelines and a 44 percent fuel market share. IOC is also the second largest petrochemical firm in the country after Reliance Industries.
The presentation further said that IOC is expanding its footprint in oil and gas exploration, LNG, wind and solar power besides venturing into nuclear energy to become an integrated energy firm. IOC, it said, is investing $2.077 billion in core business of oil refining and marketing and petrochemicals and has plans to invest $2.448 billion in the next. It has an capital outlay of $2.09 billion for 2015-16 and $2.009 billion for 2016-17.
IOC chairman RS Butola had just before the US and UK roadshows said that the department of disinvestment (DoD) would like to assess the market conditions at the roadshows and will take a view on the stake sale based on the response.
The company was of the opinion that the government should not launch the stake sale now as the company share price is "unduly depressed".
Government holds 78.92 percent stake in the country's largest oil refiner as on June 30. The PSU’s shares have recently seen a surge of Rs 15-20 per share. This follows the recommendations of the Kirit Parikh committee on fuel pricing that proposes a hike of Rs 5 per litre in diesel prices and Rs 250 per cylinder in LPG.
The department of divestment had earlier postponed the stake sale of IOC in October following opposition by the oil ministry. The ministry thought the market conditions were not conducive for disinvestment. Currently, the government holds a 78.92-percent stake in the oil major. Five merchant bankers — Citibank, HSBC, UBS Securities, SBI Capital and JM Financial — have been appointed to look after the stake sale.
The government has so far raised Rs 1,325 crore from divestments in MMTC, Hindustan Copper, National Fertiliser, ITDC, State Trading Corporation and Neyveli Lignite. Power Grid, NHPC and Engineers India have also been lined up for divestment in 2013-14.
Meanwhile, buoyed by the enthusiastic response from the investors in the road shows last month, government will also hold road shows in Hong Kong, Singapore and Australia from November 18-26 ahead of its plan to sell a five percent stake in Coal India. The government organised road shows for the world's largest coal producer last month in five countries, including Germany and the UK. Commenting to the response of investors to the road shows, coal secretary SK Srivastava had said, "It is a very sound company with strong fundamentals and they have appreciated various aspects of operations and functioning of Coal India."
The stake sales in Coal India and IOC are crucial for the government to meet the divestment target of Rs 55,814 crore for 2013-14. The department of disinvestment originally planned to sell a 10 percent stake in Coal India, but due to stiff protest from employees unions as they threatened to go on strike.
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