It as on date has licences for 19 geographical areas (GAs), IOC said in a notice to shareholders.
The notice was to seek shareholder nod for providing corporate guarantees to banks on behalf of IOAGPL furnishing of performance bank guarantees to PNGRB to fulfil the licence conditions.
"In line with PNGRB regulations, authorization to the successful entity is issued by PNGRB only after the entity submits Performance Bank Guarantee (PBG) from any scheduled bank for a pre-determined amount for specific GA," IOC said in the notice.
Shareholders will vote on the proposal at IOC's annual general meeting (AGM) in Mumbai on August 28.
City gas distribution (CGD) projects, which entail retailing CNG to automobiles and marketing piped natural gas to household kitchens for cooking as well as to industries for use as fuel, are typically long duration projects wherein demand build-up is gradual and revenue generation becomes appreciable only in the later years.
"IOAGPL is still in process of development of CGD Projects in its authorized GAs," IOC said.
"Currently, projects in 8 GAs have been commissioned (viz. Chandigarh, Allahabad, Panipat, Daman, Udhamsingh Nagar, Ernakulam, Dharwad, and Bulandshahr) and South Goa GA will be commissioned shortly. During 2018-19, IOAGPL won 10 more GAs and development of CGD Project in these GAs would require capital expenditure of Rs 9,600 crore (approx.) to meet the committed bid numbers."
The funding required for capital expenditure has to be met from equity contribution/debt financing, it said.
"The revenue from the commissioned GAs is currently insufficient to handle huge financial commitment in the form of capex to achieve committed targets. IOAGPL would continue to participate in bidding for CGD Projects in the future, and in the event of emerging successful, it may seek promoters' assistance to provide required corporate guarantees (CGs) in favour of banks for issuance of PBGs to PNGRB on behalf IOAGPL," the notice said.
Considering an estimated average value of Rs 25 crore for PBG per GA, IOAGPL may require promoters' support for the issuance of CGs worth Rs 200 crore. IOAGPL being a 50:50 JV, IOC's share for extending such CGs would be Rs 100 crore, the company said.
"Considering the anticipated growth in activities of IOAGPL, it is proposed to appoint one of the whole-time Director of IOC as a part-time nominee director on the Board of IOAGPL," the notice said.
As per provisions of Section 185 of the Companies Act, 2013, if a Director on IOC board is also a Director on Board of IOAGPL, which is a private limited company, then the state-owned firm can provide loans or issue CGs in favour of banks on behalf of the joint venture. This, however, is possible only upon approval by the shareholders of IOC through a special resolution passed at a general meeting.
"Accordingly, as required under section 185 of the Companies Act 2013, the approval of Members is sought through Special Resolution to provide CGs in future in favour of banks on behalf of IOAGPL for issuance of PBGs in favour of PNGRB for CGD Projects in various GAs, up to a limit of Rs 100 crore," the notice said.