ONGC Videsh seeks freedom to decide on investments of up to $1 bn

ONGC Videsh Ltd, the overseas arm of state-run oil and gas explorer, Oil and Natural Gas Corporation (ONGC), has sought greater financial autonomy to decide on investments of up to $1 billion (about Rs6,400 crore) without government nod, in order to speed up acquisition of overseas oil and gas assets.

The board of OVL currently has powers to decide on investment of up to Rs300 crore. Any amount higher than that has to be approved by an Empowered Committee of Secretaries (ECS) first before getting clearance from the Cabinet Committee on Economic Affairs (CCEA).

"$1 billion investment powers should be granted to us," the company's managing director Narendra K Verma said while speaking to reporters on the sidelines of a meeting of the India-Kazakhstan Inter-Governmental Commission on Trade, Economic, Scientific, Technical Industrial and Cultural Cooperation.

While Navratna status gives boards of public sector units financial powers to decide on investment projects of up to Rs3,000 crore, OVL is demanding more.

"We are seeking more than Navranta powers," he said, adding, "We are seeking powers to decide on investments of up to $1 billion."

Greater financial powers will help the company make quicker decisions on acquiring oil and gas assets abroad.

Verma said the Rs300 crore financial power for OVL was set in 2000 when the rupee-US dollar exchange rate was completely different. "Right now Rs300 crore is nothing," he said.

OVL has 35 projects in 16 countries from Brazil to New Zealand and is looking at certain acquisitions in oil and gas rich regions.

Navranta PSU status is granted to a state firm if it has made consistent profits above a certain level. One of the conditions for grant of Navranta status is that the company should be listed on stock exchanges.

OVL is currently 100 per cent owned by the ONGC. Recently the parent firm turned down a request from the department of disinvestment (DoD) to get the company listed saying low oil prices do not offer favourable valuations.

"I don't think this is the ideal time to list an oil exploration company. Low oil prices are not ideal time for listing," Verma said.

"Our portfolio predominately consists of exploration assets and a few producing properties. Markets typically do not fully value exploration assets and all our exploration assets will not get true valuations," he added.

He said it is not the lack of funds but about the freedom to use funds when needed.

OVL, he said, has been raising loans from parent ONGC as well as the market to meet cost of acquisitions and development of assets.

The company has Rs6,614 crore loan from ONGC and another Rs29,000 crore from the market. The Rs5,000 crore ONGC loan is being converted into equity, he said.

Converting Rs 5,000 crore ONGC loan into equity will raise the equity capital of OVL to Rs15,000 crore, Verma said. This will improve its debt-to-equity ratio and help it independently raise funds on the strength of its own balance sheet instead of relying on ONGC's financial status.

ONGC had in 2013 done a similar loan-to-equity conversion for OVL.