Chidambaram: New move

New Delhi, Aug 30: The Centre today approved an initial public offering (IPO) along with the sale of government equity in public sector Oil India Ltd (OIL).

The cabinet committee of economic affairs cleared the IPO of 10 per cent fresh equity as well as the sale of 10 per cent of the government’s existing shares, finance minister P. Chidambaram told reporters.

He said the state-run company would also offer one per cent of its stake to employees.

Of the 10 per cent divestment of government shares, 5 per cent will be allotted to the Indian Oil Corporation.

Two other oil PSUs — Hindustan Petroleum Corporation Limited and Bharat Petroleum Corporation Limited — will get 2.5 per cent each.

Chidambaram said a price band would be approved by the empowered group of ministers.

The band will be same for the IPO and oil PSUs.

Through the offer, the PSUs will not only strengthen their relationship with OIL but also give them an opportunity to overcome under recoveries in fuel sales by disposing of the shares later.

The fresh issue of 10 per cent of OIL’s paid-up capital will meet Sebi’s requirement of listing the company’s share on the stock exchange.

Government officials said, “The IPO will make OIL more amenable to market discipline and boost the company’s image. Besides, this will help it to raise resources for future expansion and growth.”

Chidambaram said the allocation to employees would motivate them for better performance.

The proceeds of the divestment would accrue to the government and be used for social sector programmes and reviving sick PSUs.

The government has a 98.13 per cent stake in OIL and employees hold the rest.

The IPO money will be used to finance expansion and investment projects of OIL.

The company requires $3.5 billion over the next five years for the projects.