After initial reluctance, decks cleared for OVL’s listing

By Subhash Narayan

New Delhi, Oct 31 (SocialNews.XYZ) After a long wait, decks have been cleared for the listing of ONGC Videsh Ltd (OVL), the overseas arm of country's largest oil and gas explorer ONGC, after yet another nudge by the government.

Government sources said that the board of OVL is likely to take up the proposal to float the company's shares under initial public offering (IPO) at its meeting next month. The process of appointment of merchant bankers, dates and size of the offer would be decided thereafter.

Market regulator Sebi calls for a minimum 25 per cent public float for a listed company.

The Department of Investment and Public Asset Management (Dipam) has already discussed the OVL issue with the Oil Ministry and the matter has also been discussed between the Oil and Finance Ministries, sources said.

OVL's public offer has been delayed since last year as there has been resistance for any such move at this juncture that could adversely affect company's valuations and lower realisations under the offer. In fact, the ONGC board categorically rejected the listing proposal last December.

There is fear that with several of OVL's projects languishing and others not giving the desired output, the company's valuation may fall, resulting in lower investor interest.

A case in point here is OVL's ambitious Mozambique project where OVL has pumped more than $5.5 billion but construction of infrastructure for LNG storage and transportation will take years, with production only expected to commence by 2024.

There is a question mark over the company's other projects in Venezuela that is facing acute economic crisis and the long-awaited award of Farzad-B project in Iran remains elusive for OVL with US-imposed sanctions further dampening any hope India getting the project. In Venezuela, OVL is still awaiting payment of its dues from investment in San Cristobal field, which produces around 18,000 barrels of oil per day.

OVL has also burnt its fingers in other projects such as acquisition of Imperial Energy having oil assets in Siberia. Billed as one of the most expensive acquisitions by OVL, the project's output has been falling resulting in the Indian company now looking at other buyers.

"The issue is could be addressed by creating separate SPVs for projects that would shed load off the balance sheet of OVL and help it get better valuations. This one thing that would take time to undertake and could further delay the listing," said a oil sector analyst not wanting to be named.

Also, the heavy debt of OVL would mean that it would need lenders' approval for any listing plan. As much as a third of OVL's $28.45 billion investment in 41 projects has been financed by loans.

The government owns 64.24 per cent in ONGC. The plan is that the amount realized by OVL through its IPO would also flow into the books of the ONGC and the government can recoup some of this through special dividend declared by the ONGC. The government wants the ONGC to have similar holding in OVL as it does in ONGC, post listing of its overseas arm.

The government is looking at all possible avenues to mobilise funds to achieve the higher disinvestment target of Rs 1,05,000 crore for FY20.

Source: IANS