IndianOil chief wants stake sale process called off
New Delhi   01-Oct-2013

The roadshows to disinvest 10 per cent of government equity in IndianOil may be called off as the head of the state-owned refining and marketing company has cautioned that the timing was not right due to the "prevailing uncertain environment".
Based on market feedback from merchant bankers and research analysts during IndianOil's current loan raising drive, IndianOil chairman RS Butola has warned that the share sale could fetch a low price and would further dent his company's effort to raise loans for crude oil imports.
"Current share price of IndianOil, already undervalued, may not fetch the fair value in the prevailing uncertain environment and investors in all probability are likely to factor in huge discount in their assessment of share price," Butola wrote to the petroleum ministry last Saturday, just days ahead of roadshows starting October 3. IndianOil, he wrote, was of the "strong view that the current timing of the disinvestment is not in the interest of all stakeholders".
The feedback during IndianOil's borrowing drive, he wrote, was that there was 'serious liquidity constraint' and loans were available at high cost. "Lenders also have similar concerns for downstream oil firms as being experienced by equity investors. Moreover, lenders/investors have sector and country limits which for India are already well exposed."
"Our interaction with merchant bankers and research analysts revealed that investors are concerned about prevailing uncertainties such as lack of transparent under-recovery sharing mechanism, fluctuation in profitability, liquidity constraints, implementation of the export parity pricing regime," he wrote.
Adding to this domestic ambiguity was the uncertainty over the response of the US Federal Bank on quantitative easing of US fund raising as well as India's macroeconomic woes of high fiscal deficit, depreciating rupee and declining growth.
"As a direct consequence, the investors are hesitant in investing in emerging market economies, which causes further strain on appetite of funds, making fund raising from international market more difficult," he cautioned.