ET Now chats up with B M Bansal, Chairman, IndianOil, in light of the corporation's FPO expected in March next year. Excerpts:
We have the petroleum ministry giving some sort of a timeline in deciding to divest stake of about 10% in IOC. Do you believe that this is the best time to really draw retail investors into the company?
Yes, I feel this is the appropriate time to go for disinvestment as well as for IPO because we are in need of money for our projects.
The government's decision comes after we have seen the price deregulation. Now this should ideally go well with investors, but how do you believe investors actually going to react to an FPO coming out from yet?
Definitely it will be a welcome move from the investor point of view and also from stakeholder, because the recent move from the government for deregulating the MS and partly deregulating HSD has confirmed the view that the government wants to deregulate the total MS and diesel. So the investors were looking for this kind of opportunity and I think they will be happy on this development.
B M Bansal
Chairman, Indian Oil Corporation Ltd.
Do you believe investors are looking at the FPO in an excited manner? Do you believe that they are ready to play a healthy premium for the FPO?
Yes, I feel so because the intrinsic value of IOC shares is very much higher than the present value and I am sure the investors know about it and they know that once the government has taken the initial steps for deregulation, the value of the share of IOC will go up and they are going to make good value addition to this opportunity.
A lot of companies are looking at buying into assets in the overseas markets. Is IOC planning something like that with other consortium partners?
Yes, IOC has been looking for assets outside. If you remember about 3 years back we were looking for some opportunities in Turkey. Then on ELP we have been continuously looking for some asset outside. But now we will like to concentrate on producing asset or the discovered asset and once we come across some good opportunities at the right price, definitely we will go for that.
Talking about opportunities overseas and of course the big opportunity right now is shale gas. You did have BPCL also entering the fray on that asset. What do you make of that?
Shale gas definitely has got potential in India. But not much work has been done so far on shale gas. DGH is already working on the data and acquisition, plus they may come up in another 1-1.5 year for the some rounds of shale gas. In the meantime the government is already talking to countries like the US where IOC is also in discussion along with ONGC Oil and definitely our interest in shale gas will be there. There is already a lot of potential. Once opportunities are there, we will enter into shale gas also.
The under recovery is position of IOC for the current financial year. Could you give us a sense of that also where do you expect oil prices to go in the couple of months ahead and do you expect any sort of a petrol price hike in the immediate term?
I feel crude oil prices are likely to vary between $70 and $80 per barrel during this financial year and with this price expectation, the under recovery may be around Rs 35,000 crore for the year for IOC. And MS price increase, as I mentioned earlier, whenever there is a wide fluctuation on crude oil price, it will definitely go on that. Prices have gone up almost $82 during last month.
So that could have been one opportunity, but since it was too early and we were only watching the price - now if price has again come down to $74, it was a price at which the earlier deregulation was taking place. So we are watching the price and if price goes up to again around $70-$83, we might increase the price. We will not announce that we are going to increase the price. Now since we are free to do that, anytime we can do that.
A very quick question - if oil prices do touch $80 a barrel, by how much can we expect oil marketing companies like yourselves to increase prices?
This will all depend on the oil companies. This will vary from company to company. I will not be able to comment on that, but rough calculation is that for each dollar you lose around 32 paisa.