IOC issue deferred, SAIL pulls up bankers
New Delhi   18-Jan-2011

The government might find it tough to meet its divestment target of Rs 40,000 crore for the current fiscal, with oil secretary S Sundaresan saying on Monday the much-awaited follow-on public offer (FPO) of state-owned Indian Oil Corporation (IOC) will be delayed to the next financial year.

His statement comes weeks after reports that an FPO of yet another state-run company, Hindustan Copper, slated for December, has been delayed to February or March. While IOC was expected to raise Rs 19,000 crore through its offer, Hindustan Copper was to raise Rs 4,000 crore.

Meanwhile, the divestment of ONGC is expected to take place before March. On Monday, a senior official said Bank of America, Citigroup and HSBC are among six banks that will manage the sale of government’s 5% stake in ONGC.

The government has so far raised about Rs 23,000 crore through disinvestment in companies including Manganese Ore India, Coal India, Engineers India and SJVN.

Addressing reporters in Mumbai, Sundaresan said, “while the divestment in the state-run Indian Oil Corporation (IOC) will be delayed to the next financial year, the divestment in ONGC, which is estimated at Rs 13,000-14,000 crore, will take place before the end of the current financial year.” Last week, officials of IOC had said that a decision on the stake sale was likely to be determined within three to four months' time.

The petroleum secretary's statement comes even as the the government on Monday questioned the business ethic of four leading investment bankers for accepting the job of managing the public share sale of private firm Tata Steel when they have already been empanelled as lead managers for state-owned SAIL’s FPO. Though the issue is expected to be resolved soon, it has created doubts whether the Rs 40,000 mark will be achieved in the current fiscal. Disinvestment of ONGC and SAIL is important for the government to reach closer to the targeted disinvestment prioceeds for current fiscal.

SBI Caps, Kotak Mahindra, Deutsche Bank and HSBC were hired as the book running lead managers (BRLMs) for SAIL's Follow-On Public Offer (FPO) in September, 2010, much before Tata Steel reached an agreement with the four banks to manage its over over Rs 3,000 crore FPO, scheduled to open from January 19. Terming the action of banks as "unethical", steel minister Virbhadra Singh indicated that the development may cause some delay for SAIL in hitting the capital market "if it entails changing the merchant bankers."

"We are unhappy about it. I don't know if they (banks) can do like this. Certainly, this is unethical..," Singh said at the global steel summit in Delhi. The government has sent notices to the banks to explain the matter. "They have been asked to reply in 2-3 days and then we will take a decision on whether to change the bankers,” an official said.