IndianOil may sell off ONGC, Gail stakes to offset cash crunch
New Delhi   29-May-2008
IndianOil is likely to sell a part of its investments in state-owned ONGC and Gail India to raise further funds and tide over an acute and worsening liquidity crunch. India's biggest refiner and marketer holds 16.45 crore shares, or 7.69%, in ONGC, valued at Rs 14,438 crore. It also holds another2.04 crore shares, or 2.41%, of Gail India valued at Rs 816 crore. IndianOil chairman Sarthak Behuria on Wednesday said the company was facing an acute liquidity crunch, which has forced it to put on hold all new projects. If the current scenario continues {rising global crude oil prices and no change in retail fuel prices), "the company would not have any money (liquid cash) by September end," he said. The situation would be such that "we have to convert our capital assets to have liquidity," Mr Behuria added. "Selling our investments in ONGC and Gail will be our last resort, First, we want to raise money through borrowings. We have even sought to increase our borrowing limits "to Rs 80,000 crore," IndianOil director (finance) S Narasimhan told ET. However, this move will come only after IndianOil has exhausted its borrowing limits. IndianOil’s borrowing has risen to Rs 38,000 crore from Rs 28,000 Go's Q4 net loss at Rs 414 crore. IndianOil posted a net loss of Rs 414.27 crore in the fourth quarter ended March 31,2008, compared to Rs 1,502.69 crore profit in the same quarter previous year. Net profit for 2007-08 also dipped about 7% to Rs 6,962.58 crore <Rs 7,499.47 crore). This would be IndianOil's first loss in the last nine quarters as subsidies failed to offset losses from selling fuels below cost crore in the last fiscal and it is borrowing at the rate of Rs 2,000 crore to meet its working capital requirement. The liquidity crunch is likely to have an impact on availability of fuel in the retail market in the future. Mr Behuria has said that IndianOil would not import fuel (particularly diesel) to meet the domestic demand. "We will continue our refining activities and money would be spent to buy crude. We can sustain a domestic (diesel) demand growth up to 10-12% but certainly not to the current abnormal growth which is about 22%,* he said. IndianOil had sold 2,04 crore shares of GAIL in March 2006 at Rs 275 per shares and 2.74 crore shares of ONGC in April 2006 at Rs 1,340 per shares through bulk deal realizing Rs 561 crore and Rs 3,670 crore respectively, An analyst working with international firm based in Mumbai said, " IndianOil may sell a part of its strategic equity investments in ONGC and GAIL. The purchase value of such investments was Rs 1,903 crore, while IndianOil can raise over Rs 15,250 crore by selling them at current prices. However, this may not be the opportune time for IndianOil to sell its strategic investments in ONGC and GAIL, which it calls as hidden reserves. ONGC shares dosed at Rs 875 on BSE on Wednesday compared to its all time high of Rs 1387 onNovember2,2007. The ONGC stock has lost 7% in the last one week and 17%inth« last one month.