NEW DELHI: India's top state-run refiner, Indian Oil Corp, wants the government to free up diesel prices before its $2-billion-plus share sale to raise the maximum funds from the offer, the company's chairman said on Monday.
The sale of a 10 percent stake by the government, along with the firm's plan to sell an additional 10 percent of fresh shares, should come in January or February, B.M. Bansal told Reuters. New Delhi now holds 78.92 percent in IOC, which is India's biggest fuel retailer, with a market value of $22.5 billion.
In June, India gave autonomy to oil firms to set petrol prices and raised prices of diesel, kerosene and cooking gas. It also decided to free up diesel prices but gave no time frame to implement the decision.
"We hope the government will deregulate diesel prices before the FPO (follow-on public offer)," Bansal told Reuters. "It will help a better valuation."
India's oil ministry has approved the sale of a 5 percent stake in Oil and Natural Gas Co. (ONGC) and 10 percent in IOC. It has also allowed IOC to raise funds through sale of an additional 10 percent of the expanded share capital.
Bansal said IOC aimed to raise about 100 billion rupees (about $2.2 billion) through the share sale, and wants to appoint a lead manager for the planned issue in November.
"We have to take board approval and then shareholders' approval for the shares sale," he said. "Then we have to appoint lead managers for the issue. I think we should be in a position to launch the FPO in January-February."
India's oil secretary, S. Sundareshan, recently said the government would take a view on freeing up diesel prices before the share sale of IOC and ONGC.
"This is a rare window of opportunity to fix anomalies in diesel pricing," Bansal added. "Growth in the inflation rate is softening and global crude oil prices are somewhat stable ... this is the right time."
FUELLING LOSSES
IOC's current revenue loss on the sale of a litre of diesel is two rupees, or about 5 percent below its desired market price.
India's wholesale price index (WPI) rose 8.5 percent in August compared with 9.8 percent in July after a change in the basket used as a basis for calculations, and the government expects the inflation rate to soften to 6 percent by December.
U.S. crude for October, which expires on Tuesday, added 5 cents to $73.71 a barrel by 0832 GMT, while ICE Brent for November rose 3 cents to $78.18.
Bearing revenue losses on fuel sales at state-mandated prices has cost IOC dear. In the June quarter, it posted a net loss of 33.88 billion rupees despite a discount of 36.71 billion rupees it got on crude and product purchases from ONGC, Oil India and GAIL (India).
