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Indian Govt Okays ONGC Stake Sale

The Indian government on Tuesday approved the proposal to sell 427,774,504 equity share of Rs.5 each, equivalent to five percent stake, in state-owned hydrocarbon explorer Oil and Natural Gas Corporation Ltd., or ONGC, via stock exchange mechanism and through auction at a floor price of Rs.290 apiece.

The auction shall commence on March 01 at 9.15 a.m. and shall close the same day at 3.30 p.m. Indian Standard Time.

The company is one of the top 100 listed companies in India based on the average market capitalization as of December 31, 2011.

The proposed disinvestment was deferred many times, due to market volatility and the high global crude oil prices, which necessitated ONGC to heavily subsidise the retail price of fuel in a government-controlled market. ONGC is the largest contributor of oil subsidy among the upstream firms, which also include Gail India and Oil India.

The stake sale is expected to fetch around Rs.12,000 crore. Institutional investors from abroad , primarily from West Asia, are believed to have assured the government that they would take part the auction.

The government has resorted to the auction route, under the market regulator's recent guidelines, given the downbeat sentiment in the primary market. However, this could be a dampener for retail investors.

After the auction, the government's holding in the oil major will come down to 69.14 percent from the present 74.14 percent.

The cash-strapped government is keen to conclude the auction this financial year itself and limit the fiscal deficit that is widely expected to go beyond the targeted 4.6 percent of GDP, owing to the high subsidy payout and lower-than-expected tax and disinvestment receipts.

The capital market regulator Securities and Exchange Board of India (SEBI) recently brought out norms for share auctions through the stock exchange window. As per the norms, promoters can offload a stake by way of auction through a separate window on the BSE and the National Stock Exchange. The auction process has to be completed within a day.

At the BSE, Oil and Natural Gas Corporation shares are currently trading at Rs.295.15 up by 4.09 percent from the previous close.

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by RTT Staff Writer

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