OVL to raise $900 mn through overseas bonds to fund acquisitions

24 Nov 2012

ONGC Videsh Ltd (OVL), a unit of ONGC Ltd, plans to raise about $900 million through a maiden bond issue in the international money markets, to help fund some of its overseas acquisitions.

The company has appointed Citigroup, RBS and Standard Chartered to rate the bond issue. OVL can borrow $750 million under the automatic approval route, but will have to get the approval of the Reserve Bank of India (RBI) for the remaining $150 million. The automatic route allows Indian bond issuers to raise up to $750 million without any clearances.

OVL is likely to issue five- or 10-year bonds in January. ''Currently borrowing in dollars is available at a cheaper rate,'' said D K Saraf, managing director, OVL. ''Our purchase of assets is in dollars and in our balance sheet assets and liabilities are shown in dollars.''

OVL had in the past been dependent on its parent for funding its acquisitions.

But ONGC could face a cash crunch, as it aims to invest nearly Rs35,000 crore in capital expenditure this fiscal. Its cash surplus of Rs12,000 crore is also expected to decline to Rs4,000 crore, according to the company.

In September, OVL had announced that it had signed a definitive agreements to acquire Hess Corporation's 2.72 per cent participating interest in the Azeri, Chirag and deep water portion of Guneshli fields in the Azerbaijan sector of the Caspian Sea (ACG), and 2.36 per cent interest in the Baku-Tbilisi-Ceyhan Pipeline (BTC) for $1 billion. This would mark OVL's entry into the oil-rich region.