“Due to the existing legal framework, ONGC has to finance the buyback through internal resource accruals instead of loans borrowed from banks or financial institutions. Hence, ONGC requires time up to mid-December for arranging the internal resources,” the PSU told the ministry. “ONGC will then have to substantially defer the interim dividend for current (fiscal) year and shift the same to final dividend payable in the next financial year,” it wrote.
According to sources, the ministry is yet to react to the request as to which of the two routes it wants ONGC to follow.
ONGC had asked for exemption in August
Citing poor liquidity and other financial liability, ONGC had sought an exemption from the buyback from the government in August, saying it needed money to service the unsecured loan of Rs 25,592.21 crore that was taken to partially fund purchase of gas assets of Gujarat State Petroleum Corp (GSPC) as well as state-run refining and marketing company Hindustan Petroleum (HPCL). These two deals had elicited fierce backlash in recent months after the Mazdoor Sangh of the oil marketing company (OMC) in an open letter to Prime Minister Narendra Modi apprised him of the dwindling cash reserves of ONGC. It said that the company that once used to be cash-rich was now reeling under debt.
Sources said that after the Mazdoor Sangh letter was circulated widely in public and it hogged the limelight, the ONGC’s internal management had asked its trade union to keep a low-profile, while assuring that their grievances will be looked into. The request made by ONGC to the finance ministry could be a consequence of that internal meeting, sources said.
ONGC one of three oil PSUs identified by DIPAM for share buyback
ONGC is one of the three oil companies identified by the Ministry’s Department of Investment and Public Asset Management (DIPAM) for government share buyback to meet the Ministry’s divestment target of Rs 80,000 crore.
The exploration firm has to buy back 3 per cent of the government-held shares for which it requires Rs 4,826 crore. Last fiscal year, on government instructions, it paid interim dividend twice amounting to 105 per cent or Rs 6,736 crore.
The other two — national oil company Oil India Ltd (OIL) and oil refining and marketing Indian Oil Corp (IOC) — were directed to buy back 5 per cent each.