The Finance Ministry plans to offload 10 per cent stake or 24.27 crore shares of IOC that is expected to fetch the exchequer around Rs 4,800 crore. The official further said two options would be presented before the EGoM.
In the first option, ONGC and Oil India (OIL) will buy 5 per cent stake each in the oil marketing PSU. The second option would be OIL buying 7 per cent stake and ONGC the remaining 3 per cent, the official said.
Giving the reasoning for the second option, the official said: "ONGC does not have sufficient cash reserve, whereas OIL is sitting on a cash pile of Rs 8,000 crore." If ONGC and OIL pick up stakes in IOC, it would be through the cross-holding route of disinvestment. The government in the past too had resorted to the cross-holding route to shore up its revenues.
In late 1990s, the government had sold its shares in Oil and Natural Gas Corporation (ONGC), GAIL and Indian Oil Corp (IOC) to raise Rs 4,643 crore.
According to that cross-holding plan, ONGC bought 9.11 per cent in IOC and 4.83 per cent in GAIL. IOC bought 9.61 per cent in ONGC and 4.83 per cent in GAIL. GAIL in turn bought 2.4 per cent in ONGC.
In 2006, IOC sold 1.92 per cent, or a fifth of its holdings in ONGC for Rs 3,672 crore, recovering its entire initial investment and some more. It also sold half its holdings (2.41 per cent) in GAIL for Rs 561 crore.
The EGoM on January 9, 2013 deferred disinvestment of 10 per cent stake in IOC through an offer for sale on the stock markets owing to strong opposition from oil ministry.
The ministry felt IOC shares, which on closed at Rs 208.95 on the BSE, were way below its intrinsic value. Today's closing is way lower than the 52-week peak of Rs 375 reached on January 18 last year.
At today's closing price, IOC has market capitalisation of Rs 50,732 crore. This m-cap is after factoring in IOC's 7.69 per cent holding in ONGC worth about Rs 18,000 crore.
That leaves about Rs 30,000 crore market value that is attributable to IOC. This is less than the investment that IOC is putting in setting up a 15 million tonne refinery at Paradip in Odisha, according to the oil ministry.
The Finance Ministry had planned to sell 24.27 crore IOC shares to meet a tenth of its Rs 40,000 crore disinvestment target for the current fiscal. The government holds 78.92 per cent stake in the country's largest oil refiner as on June 30.
IOC stock price
On January 15, 2014, Indian Oil Corporation closed at Rs 208.95, up Rs 3.00, or 1.46 percent. The 52-week high of the share was Rs 375.00 and the 52-week low was Rs 186.20.
The company's trailing 12-month (TTM) EPS was at Rs 67.69 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 3.09. The latest book value of the company is Rs 251.75 per share. At current value, the price-to-book value of the company is 0.83.
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