Govt eyes over Rs14,000 crore via sale of stakes in Indian Oil Corp, Coal India

The government expects to raise over Rs14,000 crore (about $2.3 billion) through sale of part of its stakes in oil refiner and marketer Indian Oil Corporation and mining giant Coal India Ltd (CIL) during the current financial year.

The Department of Disinvestment (DoD) has revived plans to sell 10 per cent stake in state-run refiner Indian Oil Corporation to raise around Rs5,000 crore ($800 million) and a five per cent stake in Coal India Ltd (CIL), for over Rs9000 crore (about $1.5 billion).

The DoD has kicked off road shows for stake sale in Indian Oil Corp after completing overseas road shows for the sale of stake in Coal India Ltd.

The follow-on stake sales in the two state-run enterprises are expected to be launched before 15 December, ahead of the Christmas and New Year holidays.

Interestingly, Indian Oil Corp road shows will start tomorrow (12 November) in a difficult market after the state-run refiner and oil marketer reported huge hits from sale of subsidised fuel that has not been compensated for.

Government officials, however, declined to confirm that the share sales would be launched before mid-December.

Indian Oil Corp, India`s largest refiner and fuel retailer, on Friday reported an 82-per cent drop in its net profit for the July-September 2013-14 quarter after the cash-strapped government failed to fully compensate the company for subsidy losses and  on account of foreign exchange losses (See: Indian Oil's Q2 net drops 82% to Rs1,684 cr on forex, subsidy losses).

State-run oil marketing companies, Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum have together reported losses of Rs62,300 crore in the first half of the current financial year and the losses are expected to top Rs80,300 crore in the second half of this financial year.

While the stock market is on a high with most stocks on the upswing, with the benchmark stock index hitting a record high this month on the back of strong foreign inflows, the divestment department is not so confident to push through the stake sales at a time when the IOC profit has taken a big hit.

At current market prices, the 10-per cent stake sale in Indian Oil could fetch around Rs5,000 crore and a 5-per cent stake in CIL around Rs9,000 crore.

The government owns nearly 79 per cent in Indian Oil, and 90 per cent in Coal India.

DoD officials have met investors in the United States and Britain and will now proceed to Australia and South East Asia this week. Road shows for local investors will be held after that.