Paying The Price

The oil explorer burnt cash to buy HPCL, Pay Large Dividend And Is Now Being Pushed For A Share Buyback To Help Meet The Government's Disinvestment Target. Can increase in crude oil prices rebuild market sentiment?

- Anilesh S. Mahajan

IN MID-SEPTEMBER, the Department of Investment and Public Assets Management, or DIPAM, asked ONGC to buy back government shares by the end of November. The government is looking to earn 4,800 crore from this financial jugglery. But this has made the management as well as investors jittery.

The government owns a 67.45 per cent stake in ONGC. Earlier, DIPAM had toyed with an idea of selling a 5 per cent equity in stock markets, but later realised that a buyback might get it more money than what hard-nosed investors would pay. DIPAM, worried over the stiff disinvestment target of 80,000 crore for 2018/19, has sent buyback diktats to Oil India and Indian Oil too from where it aims to raise 1,100 crore and ̀ 4,000 crore, respectively. DIPAM officials say buybacks will get them a higher than market price for these shares.

The officials are not wrong as investor interest in oil companies has been tepid over the last year or so. Apart from volatile crude oil prices and geo-political situation and push towards adoption of cleaner energy, there is fear about the government dipping into PSU cash reserves to meet its revenue goals in an election year. ONGC shares have fallen 6 per cent so far this year. During the period under the