Finance ministry once again mulls launch of follow-on public offers (FPO) for largest explorer

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ONGC and power equipment major Bhel late next month or early March 2012. Centre plans to mop up around Rs 15,000 crore by selling shares in these two enterprises as part of its last minute exercise to mop up disinvestments funds. As per government’s new dis-investment strategy, shares of three companies L&T, ITC and Axis Bank held by government owned SU-UTI would be transferred to a special purpose vehicle, which in turn would pledge them to borrow money from banks for buying government equity in PSUs.

These will not only help prop up the sagging Indian capital markets but would also help in raising much needed non-tax revenues. Financial Chronicle reported on the development on January 10. Share sale of ONGC and Bhel are likely to hit the street after SPV is created, two persons close to the development told this newspaper. Government targets divesting five per cent stake each in ONGC and Bhel. On Tuesday’s market capitialisation of Rs 223,640 crore on the Bombay Stock Exchange of ONGC, fiver per cent share sale would fetch government Rs 11,182 crore. At the same time, Bhel share sale would fetch Rs 3241.80 crore on market capitalisation of Rs 64,836 crore. When contacted, ONGC chairman and managing director Sudhir Vasudeva said, “I won’t comment on this issue.” Officials from department of disinvestments and ONGC management discussed in detail all crucial factors such as subsidy burden and weak investor sentiment among others as precursor to launch of the explorer’s FPO last Friday.

ONGC has been asked to prepare its third quarter accounts and brace up for filing the red herring prospectus with market regulator Sebi at short notice. Earlier, ONGC follow on public offer was expected to open for subscription on September 20 and close on September 23. However, the issue was called off at last moment. The explorer has also withdrawn its red herring prospectus (RHP) in November 2011. ONGC filed its RHP in September 2011 that was valid for 90 days.

“Decision of government would be final on FPO. Department of disinvestments have to take the decision on this issue,” Bhel chairman and managing director B P Rao told Financial Chronicle on Tuesday.

At the same time, government will have to induct two new independent directors on Bhel board to make the company Sebi-compliant for share sale.

Government has already appointed four merchant bankers — Morgan Stanley, DSP Merrill Lynch (Bank of America), ICICI Securities and Kotak Mahindra Capital to handle Bhel FPO.