ONGC said to plan $4.8-billion Indian Oil, GAIL stake sale

The state-run explorer may sell shares of Indian Oil Corp. and GAIL India Ltd. in multiple transactions on the open market through the year, the people said, asking not to be identified because the information isn’t public. ONGC has already received the approval of the government and is waiting for the right price to begin offloading the shares, they said.

The sales can help ONGC return to its debt-free status, give it greater flexibility to acquire overseas oil and gas assets and invest in projects to boost output. ONGC holds 13.77% stake in Indian Oil, the nation’s biggest refiner, and 4.83% in its largest gas utility, GAIL. The holdings can fetch over $4.8 billion at current market rates, covering almost 90% of the loans taken by the New Delhi-based driller.

ONGC raised one-year bridge loans worth 350 billion rupees ($5.4 billion) from seven banks to partly fund the 369 billion-rupee purchase of the government’s holding in HPCL. It tapped the debt market for the first time last month and can pay off its entire loan if it uses part of its 130 billion rupees of cash reserves.

ONGC rose as much as 3.3% and traded 2.9% higher at 190.80 rupees as of 2:55 p.m. in Mumbai on Wednesday. Indian Oil climbed as much as 2.2% to trade 0.9% higher at 405 rupees.

An ONGC spokesman declined to comment on Wednesday. Finance Ministry spokesman D.S. Malik wasn’t immediately available for comment.

“We will use our cash balance first and then liquid assets. Debt will be last,” ONGC Chairman Shashi Shanker had said on Jan. 22, while announcing the HPCL deal that was completed on Jan. 31. “We will take a call on selling if the market is favorable, but we won’t sell anything in distress.”