"No rethink on IOC's GDR issue"
Our Infrastructure bureau
New Delhi, Jan 20: The union cabinet's efforts to fulfil its obligation towards national oil companies by issuing oil bonds, seems more of a gesture intended to vindicate the United Front (UF) government's commitment to economic reforms, than a definite bid to push ahead with Indian Oil Corporation's (IOC's) global depository receipts (GDR) issue.Industry observers, caught unawares by the cabinet's decision on Tuesday night, did not feel the announcement will prompt a re-think on the GDR float. Earlier this month, the core group on disinvestment, comprising representatives from the union ministries of finance, industry and petroleum, had decided to put the issue on hold. The group's decision was partly prompted by an argument offered by IOC's global advisors to the proposed GDR issue. Foreign institutional investors (FIIs) felt since most of the projected well-being of national oil companies depended on reforms in the petroleum industry, it was necessary for the new government to vet the policies
announced by the UF. The phased reduction in excise and customs duties -- which will enhance the profit margins of the oil companies -- for instance, have to be vindicated by the new government's budget proposals. The core group, like the global advisors, had also felt market conditions would not warrant an equity float at the moment. Absence of the oil bonds -- which convert the oil companies' outstanding dues from the oil-pool account into investments they can subcribe to at an interest of 10.5 per cent -- was the third hindrance to Indian Oil's proposed GDR float. Prabir Sengupta, secretary in the ministry of petroleum and natural gas, said: ``As of today, we have not been able to decide on a date for IOC's GDR issue.'' Indian Oil's director finance, Suresh Mathur, also refrained from commenting on the fate of the GDR. He felt the Rs 15,090-crore bonds being offered to the oil companies would help canalising agency, IOC, to raise more borrowings for its oil imports. ``The oil companies'
outstandings are being given (to them) in the form of bonds, which go into investments and strengthen the company's balance sheet,'' he said. The canalising agency imports about $9 billion worth of crude and petroleum products a year and funds part of it from market borrowings. Indian Oil's external commercial borrowings (ECB) are already close to the government-imposed ceiling of $3.5 billion. So far, the absence of oil bonds, of which Indian Oil owns the giant's share of about Rs 10,000 crore, has not upset its fund-raising plans. A poll conducted by Euroweek has found the Rs 43,862 crore-turnover oil refining and marketing company to be ``the best sovereign/public sector borrower in Asia''. Mathur has gone on record that IOC was able to access off-shore funds at same pricing levels as before, notwithstanding the south-east Asian currency crisis. The company raised $500 million of syndicated facility in May, priced at 24.5 basis points above Libor. It recently tied up short-term borrowings of about
$300 million at an all-in cost of Libor plus 22.5 basis points. Indian Oil has also tied up FCNR (B) loans from domestic banks for a maturity period of three years, worth $225 million, and hopes to raise another $500 million soon. The inflow of funds nothwithstanding, company brass harp on the need to also possess the collateral security offered by the oil bonds. The cabinet decision, if vetted by an ordinance, will probably bring that added edge to the company's borrowing power.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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