IOC follow-on offer expected to hit market in January: Bansal
New Delhi   23-Sep-2010

IndianOil (IOC) expects to hit the capital market in January with a proposed follow-on public offer (FPO) to raise equity by issuing fresh shares equivalent to 10% of its paid-up capital. The share sale should fetch IOC anything between Rs 9,000 crore and Rs 10,000 crore, depending on market conditions, the company said on Wednesday. The proceeds will be used to meet the company’s capital expenditure requirement.

The government also plans to divest 10% of its stake in the company through the FPO to meet its target of mopping up Rs 40,000 crore through disinvestment in the current fiscal in a bid to bridge its fiscal deficit. “We expect it (FPO) in January,” IOC chairman B M Bansal said after launching the company’s petrochemicals brand ‘PROPEL’.

IOC’s board has given its approval for the proposed FPO. Now, the company will seek shareholders’ approval. The company has already bagged in-principle approval from the petroleum ministry. IOC has identified petrochemicals business as a future growth driver. Besides, it also helps the company add value to naphtha produced in its refineries. The company has been dumping surplus naphtha in the overseas market because of inadequate downstream petrochemical manufacturing facility in its refineries.

The company generated Rs 3,000 crore in revenue from its petrochemicals business in 2009-10, which it expects to go up to Rs 6,000 crore in the current financial year. It should go further up to Rs 15,000 crore in 2011-12 when IOC’s downstream polymer units at Panipat become fully operational.

Currently, petrochemicals business accounts for 2-3% of the company’s total revenue. The company is also considering reviving its Paradip petrochemical project as its cash flows have improved following deregulation of petrol pricing by the government in June this year. The company is expected to take a decision soon on whether it should continue with product slate already finalised for the envisaged petrochemical project at Paradip or it should introduce some new products.

Meanwhile, with visa problems for Chinese working at the ongoing Paradip refinery project resolved, implementation work is proceeding smoothly. IOC expects to fully commission the project by November 2012 as per schedule.