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OIL and Natural Gas Corp's (ONGC) 13,000-crore public issue is likely to be deferred to the next fiscal, making it the second equity offering to be a casualty of crude oil's ascent to nearly $100 barrel.
IndianOil's planned 20,000-crore offering has already been postponed to 2011-12 as the government's decision to freeze diesel rates despite soaring crude prices clouded the company's earnings outlook and valuation.
ONGC, which will have to foot a big chunk of the fuel subsidy bill, is facing a similar situation, although the timing of its issue will be decided by the cabinet.
"This is not the right time for the public issue. We will not get its right valuation," a cabinet minister, who did not want to be named, said. 'Not the right time'
WE MUST not go for distress sale, especially when we have substantial collection from the auction of spectrum," the minister added, referring to the auction that fetched over 1 lakh crore for the exchequer. The setback for the issue comes just days after leading bankers made a presentation to get the mandate to manage the offer. ONGC has shortlisted Morgan Stanley, HSBC, Nomura, Citigroup, Bank of America Merrill Lynch and JM Financial Services for the mandate. ONGC's subsidy burden in 2009-10 is estimated to rise over 50% to about 22,000 crore in this financial year.
Experts do not see this as the appropriate time to get better value for India's blue-chip company. The subsidy burden would impact its overall profitability and valuation for the purpose of FPO, KPMG director for tax & regulatory services Nabin Ballodia said.
Earlier this month, ONGC chairman & managing director RS Sharma said a higher subsidy payout would hit the company's third-quarter profits. According to ONGC officials, India's largest oil producer finds optimum comfort level at a crude oil price of $70-80 per barrel. Beyond this level, the company's net realisation decreases due to higher subsidy outgo.
IndianOil's planned 20,000-crore offering has already been postponed to 2011-12 as the government's decision to freeze diesel rates despite soaring crude prices clouded the company's earnings outlook and valuation.
ONGC, which will have to foot a big chunk of the fuel subsidy bill, is facing a similar situation, although the timing of its issue will be decided by the cabinet.
"This is not the right time for the public issue. We will not get its right valuation," a cabinet minister, who did not want to be named, said. 'Not the right time'
WE MUST not go for distress sale, especially when we have substantial collection from the auction of spectrum," the minister added, referring to the auction that fetched over 1 lakh crore for the exchequer. The setback for the issue comes just days after leading bankers made a presentation to get the mandate to manage the offer. ONGC has shortlisted Morgan Stanley, HSBC, Nomura, Citigroup, Bank of America Merrill Lynch and JM Financial Services for the mandate. ONGC's subsidy burden in 2009-10 is estimated to rise over 50% to about 22,000 crore in this financial year.
Experts do not see this as the appropriate time to get better value for India's blue-chip company. The subsidy burden would impact its overall profitability and valuation for the purpose of FPO, KPMG director for tax & regulatory services Nabin Ballodia said.
Earlier this month, ONGC chairman & managing director RS Sharma said a higher subsidy payout would hit the company's third-quarter profits. According to ONGC officials, India's largest oil producer finds optimum comfort level at a crude oil price of $70-80 per barrel. Beyond this level, the company's net realisation decreases due to higher subsidy outgo.
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