NEW DELHI, June 22: Public sector Oil India Ltd (OIL) has put its proposed public issue on hold, taking a cue from the Disinvestment Commission, and has advised the centre not to offload its shares till the administered price mechanism (APM) was dismantled.

The Rs 1,162-crore-turnover company, that has an admirable debt to equity ratio of 0.12:1, will instead raise its projected resources shortfall of Rs 250 crore through the debt route. Oil India is expected to place a formal proposal before the petroleum ministry shortly and subsequently work out the nitty-gritties of the debt instrument to be used.

``We have not yet decided whether it will be a bond, a commercial paper, a global depository receipt (GDR) or an Indian issue,'' said sources working on the proposal, pointing out that the proposal was yet to be approved by the Union ministry of petroleum and natural gas.

The public issue was expected to fund Oil India's ambitious exploration programme in the north bank of the Brahmaputra, where it had found three promising oil prospects in 1995. Petroleum ministry sources said Oil India would have to fund its investment programme through debt `for a year or two' till the market was ripe for a public issue.

The 1997-98 performance budget of the ministry of petroleum and natural gas says that Oil India's planned expenditure on the exploration programme was Rs 552 crore during the fiscal. The expenditure would be met out of internal resources of Rs 316.68 crore and an Oil Industry Development Board (OIDB) loan of Rs 205 crore.

Any subsequent shortfall in funds would be raised ``from the market through a fresh equity issue'' the report says. The budgeted shortfall in the availability of funds for the project is only Rs 31 crore, according to the petroleum ministry. Company sources, however, peg the fund shortfall to be much higher.

Oil India director (finance) PG Chanda told The Financial Express that the ``resources gap for the next two years would be Rs 250 crore'' for the new exploration programme in the north-east. He acknowledged that Oil India ``might take the debt route,'' pointing out that the proposal was yet to be vetted by the petroleum ministry.

For that matter, the public issue, that had been planned as far back as 1995, does not have the mandatory approval of the Cabinet Committee on Economic Affairs (CCEA) either. In preparation of the issue of public shares, however, Oil India was allowed to become a public limited company with effect from August 11, 1995.

It made its first issue of 13.34 lakh shares to employees in March last year at a premium of Rs 99 per share of Rs 10.

In June came a bonus issue in the ratio of 1: 1, raising Oil India's paid-up capital to Rs 142.67 crore from Rs 71.33 crore.

In September, Oil India chairman NN Gogoi told shareholders at their annual meeting that ``to meet the future fund requirement for our accelerated exploration programme, subject to government approval, the company is exploring the possibility of going to the public to raise capital by issue of shares through appropriate instruments, at a suitable time, subject to market conditions.''

The petroleum ministry feels that the market conditions would only be right when national oil companies were allowed to claim international prices for their crude, making their shares attractive investments. The difference in the international and domestic price of crude is roughly Rs 1,290 a tonne at present, placing the Oil and Natural Gas Corporation (ONGC) and Oil India at a considerable disadvantage to private sector investors.

The phasing out of the administered price mechanism is not expected before the turn of the century, being the last step in the planned process of deregulating the petroleum and gas sector. Oil India's public issue, like the centre's disinvestment programme, is likely to hang fire till then.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.