ONGC wants a stock-split before FPO

OIL and Natural Gas Corp (ONGC), a leading state-owned explorer, has urged the government to opt for a stock split prior to the proposed follow-on public offer (FPO) in March 2011.

ONGC chairman and managing director R S Sharma told reporters in Delhi today that the Rs10 share (face value) could be split into two, especially since the market price was above Rs1,300.

The Indian government, which currently has a 74.14 per cent stake in ONGC, plans to sell a 5-per cent stake before the end of the current fiscal.

The ONGC board will also consider a proposal for a bonus issue to the existing shareholders, added Sharma. The oil major had come out with a 1:2 bonus issue in 2006.

Similarly, when it had come out with an IPO in 2004, the company had offered a 5-per cent discount to retail investors. Sharma said he would urge the government to make the FPO attractive for retail investors and employees by offering discounts.

The Indian government's move to dilute its stake in several public sector undertakings – to help finance its social sector projects – got a boost recently following the overwhelming investor response to the Coal India IPO; the issue was over-subscribed by more than 15 times. The government expects to raise nearly $3 billion from the ONGC FPO.

Stocks of state-owned energy majors including ONGC have caught investor fancy in recent weeks, especially after the government went in for decontrol of the price of petroleum products. However, last week saw ONGC scrips take a beating on the market, losing three per cent and a Rs8,620 crore erosion in its market value.

ONGC reported a six per cent rise in net profit for the second-quarter of the current fiscal, despite a higher subsidy bill and royalty payments. The company reported net profit of Rs5,389 crore for the July-September quarter.