Modi govt weighs paring stake in Indian Oil to below 51%

A logo of Indian Oil is picture outside a fuel station in New Delhi, India August 29, 2016. REUTERS/Adnan Abidi/Files

India plans to reduce its stake in Indian Oil Corp. to below 51% while ensuring the government and state-run companies retain control of the nation’s largest oil refiner, people with knowledge of the matter said.

Prime Minister Narendra Modi’s cabinet will consider, as early as next week, a proposal to sell shares in some companies, including Indian Oil, to below 51%, the people said, asking not to be identified as the plan is not public. India directly holds 51.5% in Indian Oil, and another 25.9% through state-run Life Insurance Corp. of India, and explorers Oil & Natural Gas Corp. and Oil India Ltd.

Sluggish revenue collections has left Modi’s administration with little choice but to push ahead with a plan to raise a record 1.05 trillion rupees ($14.6 billion) through asset sales in the financial year through March. A slippage will put the government’s goal of capping its budget deficit at 3.3% of gross domestic product at risk, and prompt rating companies to put India’s credit score on a path for a downgrade to junk.

Government can sell as much as 26.4% its holding in Indian Oil — valued at about 330 billion rupees — and still retain indirect control. Finance ministry spokesman Rajesh Malhotra could not be immediately reached for a comment.

The South Asian nation is likely to start selling shares in Indian Oil through an exchange-traded fund in January, according to the people. The ministers’ panel is also expected to take up other crucial proposals such as privatization of Bharat Petroleum Corp., Shipping Corp. of India and Container Corp. of India, they said.

Finance Minister Nirmala Sitharaman, in her budget speech, announced plan to lower direct holdings in some state-run companies below 51% on a “case-to-case basis.” The government later identified the biggest energy companies such as Indian Oil, ONGC, NTPC Ltd. and GAIL India Ltd. as probable candidates for such reductions.

Shares of Indian Oil surged more than 6%, reversing losses. It ended 2.2% higher at 136.85 rupees in Mumbai.

“This move will only benefit the government,” said Deven Choksey, managing director of Mumbai-based wealth manager and brokerage K.R. Choksey Shares and Securities Pvt. “This won’t add any value for the retail investors or the company.”

Indian Oil, along with its unit Chennai Petroleum Corp., operates 11 refineries, controlling more than 35% of the nation’s total crude oil processing capacity. It’s also India’s biggest fuel retailer, owning about half the country’s refilling stations.

Bloomberg

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.