Cabinet approves sale of 10% equity in Indian Oil

The union cabinet today approved a proposal to divest 10 per cent equity in state-owned refiner Indian Oil Corp Ltd (IOC), to raise around Rs3,750 crore.

"IOC disinvestment proposal has been cleared by the CCEA (Cabinet Committee on Economic Affairs)," information and broadcasting minister Manish Tewari said.

The sale of a 10 per cent stake is expected to fetch around Rs3,750 crore ($786 million) to the exchequer at Indian Oil's current market price.

The government holds a 78.92 per cent stake in IOC.

The disinvestment department has already selected five merchant bankers - Citibank, HSBC, UBS Securities, SBI Capital and J M Financial - to manage the stake sale.

IOC, the nation's largest refiner, has a market capitalisation of Rs54,519 crore. It posted a net profit of Rs5,005 crore in 2012-13, up from Rs3,954 crore in the previous year.

IOC, which sells fuel at below-market prices, reported a peak profit of Rs10,221 crore in 2009-10. The company, however, is partially compensated by the government.

The divestment is part of the government's plan to raise Rs40,000 crore through stake sales in public sector units during the current fiscal year ending March 2014.

So far, it has raised over Rs929 crore through stake sale in MMTC, Hindustan Copper and National Fertiliser.

Shares in Indian Oil, the country's biggest refiner, closed at Rs195.55, down 4.6 per cent, before the announcement.