Another blue-chip coming: ONGC board feels it’s time to list OVL
The board of Oil and Natural Gas Corp (ONGC) on December 21 considered the government demand for listing its profitable overseas investment arm ONGC Videsh Ltd (OVL).
The ONGC board has opined that it is not the right time to list the firm’s overseas investment arm ONGC Videsh on the bourses, sources said.
The board of Oil and Natural Gas Corp (ONGC) on December 21 considered the government demand for listing its profitable overseas investment arm ONGC Videsh Ltd (OVL).
The board deliberated on the demand from the Department of Investment and Public Asset Management (DIPAM) for the listing of OVL but felt that the market conditions are not right for an oil and gas exploration and production company to list, they said, adding that there were several complexities involved in getting the firm listed.
OVL, sources said, has assets in countries like Venezuela, Iran, and Sudan, which are exposed to some or other Western sanctions.
These assets will have to be first separated from the company. While this may not be a difficult task, it would involve issues of capital gains and tax thereon, they said.
Also, OVL is heavily under debt and such a move would require taking approval of all the lenders — yet another tedious job.
A third of its USD 28.45 billion (Rs 1.51 lakh crore) investment in 41 projects in 20 countries has been financed by loans.
More importantly, OVL has been only in acquisition mode till now and has not yet reached an economic model where it can stand on its own feet. The company is dependent on its parent for even guarantees for taking loans.
OVL has great assets and it would reach that economic model once a couple of its assets like the giant gas field in Mozambique starts production, they said.
OVL projects are in the development stage and an IPO will get the best value when these projects are monetized, they said.
OVL’s giant gas field in Mozambique will start production sometime in 2022 when two LNG trains of 12 million tonnes per annum capacity are set up and gas exported in cryogenic ships.
Its Farzad-B gas field in Iran is on hold in view of US sanctions on the Persian Gulf nation. Also, its Venezuelan oilfields are producing much less than their potential.
According to a letter DIPAM wrote to ONGC management in August, the listing of OVL would help unlock value by improving its corporate governance and efficiency.
ONGC had helped the government meet its disinvestment target last fiscal when it bought a 51.11 percent stake in state-owned Hindustan Petroleum Corp Ltd (HPCL) for Rs 36,915 crore.
After failing to find a buyer for Air India, DIPAM is again looking at ONGC to meet the Rs 80,000 crore revenue mobilization target set out for it in the Budget for 2018-19 from the sale of government stake in PSUs.
In the letter, DIPAM said PSUs with a positive net worth and no accumulated losses should be listed to unlock value.
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