The Hindu : Business : To buy back IOC stake

Online edition of India's National Newspaper
Thursday, Oct 14, 2004

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Business

To buy back IOC stake

By Our Special Correspondent

NEW DELHI, OCT. 13. The Union Petroleum Minister, Mani Shankar Aiyar, today endorsed the decision of the Oil and Natural Gas Corporation's decision to buyback Indian Oil Corporation's equity stake in the company, thereby reversing a decision on such public sector cross-holdings by the National Democratic Alliance government.

The ONGC, IOC and GAIL had been directed in 1998 to buy shares in each other's concerns. ONGC thus acquired 9.8 per cent equity in IOC, while IOC and GAIL in turn bought shares in ONGC.

The funds raised by these public sector companies by sale of shares were transferred to the central exchequer to help the Government bridge the fiscal deficit at that time and was described as "disinvestment" by these firms.

ONGC has now obtained approval from its shareholders at the annual general meeting to buy back IOC's 9.6 per cent shareholding in the company.

At current share prices, ONGC will have to pay IOC about Rs. 11,000 crores for the buyback. This would enable IOC to raise funds for future investment plans.

Mr. Aiyar said the payout by ONGC was not likely to impact the company's future plans in oil and gas exploration and production.

He felt that the decision was ONGC's vote of confidence in itself and he "endorsed" it.

Besides, he pointed to the fact that the decision was unravelling of a step taken before he took over and even commented that ONGC might not have been a willing party to the original scheme of cross-holdings.

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