Disinvestment booster: ONGC board clears Rs 40-bn share buyback

In a boost for the government's effort to meet its disinvestment target for the current financial year, the board of state-run Oil and Natural Gas Corporation (ONGC) on Thursday approved its share buyback worth Rs 40.22 billion.

As on December 11, the government has realised Rs 340.05 billion as disinvestment proceeds against the budget estimates of Rs 800 billion in 2018-19. In a filing to the Bombay Stock Exchange (BSE), ONGC said today that it will repurchase 1.97 per cent stake or 25,29,55,974 equity shares at a price of Rs 159 per share. Last month, ONGC had reportedly approached the finance ministry stating that the company would not be able to go for a share buyback and pay interim dividend too. The company was under financial stress after the acquisition of 51.11 per cent stake in Hindustan Petroleum Corporation (HPCL) for Rs 369.15 billion and 80 per cent stake in Gujarat State Petroleum Corporation’s (GSPC) Krishna Godawari basin block for Rs 77.38 billion.

After these acquisitions, ONGC’s consolidated debt was seen at Rs 1.11 trillion during the previous financial year, causing a concern for the largest hydrocarbon producer in the country. “For a company like ONGC with a net worth of over Rs 2 trillion, a buyback of Rs 40 billion will not cause any material impact. If the majority shareholder asks for it, a company with strong financials can go for it,” said R S Sharma, former chairman and managing director of ONGC.

According to sources Department of Investment and Public Asset Management (Dipam) is targeting around Rs 150 billion of the financial year’s divestment target from share buybacks. Share buyback is the repurchasing of shares by the company that issued it. 

The government was targeting three cash-rich oil majors Indian Oil Corporation (IOC), Oil India and ONGC to raise at least Rs 100 billion out of this. IOC too had said that it will buyback shares worth Rs 44.35 billion and will pay a dividend to the tune of around Rs 65.56 billion.  On November 23, OIL board too had cleared a buyback of 4.45 per cent for Rs 10.85 billion.