Centre to defer OIL stake sale

New Delhi: After getting LIC to bail out big ticket IOC disinvestment, the government is not likely to sell a 10 per cent stake in Oil India soon as it feels the company will not get a good valuation in current low oil prices.

 

“Fortunes of an upstream oil and gas producer is directly linked to oil prices. Revenues which they earn are directly proportional to prevailing oil prices. So in a scenario when international oil prices have dipped to six-and-half-year low, we don’t think OIL will get the right valuation,” a senior government official said.

 

The government had planned to sell 10 per cent shares in OIL, the nation’s second biggest state-owned oil producer. The sale of 6.01 crore shares at current market price will fetch the government Rs 2,813.31 crore, about 10 per cent lower than the February, 2013, divestment of similar number of shares garnering Rs 3,100 crore.

 

Oil prices have slumped from $115 a barrel last summer to less than $44 now. “It makes no sense to go ahead with OIL disinvestment in current scenario. I think we will wait for volatility in the oil prices to settle before deciding on a stake sale in OIL,” the official said.

 

Last Monday, the government managed to raise Rs 9,379 crore from sale of 10 per cent stake in Indian Oil Corp (IOC), with state-owned LIC picking up 86 per cent of the shares on offer.

 

“IOC is a downstream oil refining and marketing company whose fortunes are not so much affected by oil prices. We feel IOC disinvestment should have been better but for the freak Monday when global capital markets collapsed,” he said. But slump in oil prices is not helping get good valuations for upstream oil companies.