Indian government may delay IOC divestment until rupee stabilizes

The Indian government is likely to delay divestment of its stake in Indian Oil Corp. (IOC), until rupee volatility eases. The divestment was planned for August 2013 to meet the Securities and Exchanges Board of India (SEBI)’s minimum public float norm for public sector units. The stock fell nearly 5% following the news report.
There is also uncertainty over the subsidy sharing mechanism for 2013 and how much subsidy the government is actually going to give oil marketing companies. Once a decision is reached, the government may go ahead with the Indian Oil divestment.
For those companies which are loss-makers, the government is going to set up a special purpose vehicle which will buy shares of the loss-making public sector undertakings from the government at a nominal rate of about INR1 (USD0.02), as they cannot be divested in the open market.
As for the government’s main divestment agenda, there is a target of INR400 billion (USD6.2 billion) and some of the main candidates are Coal India, Indian Oil and the National Hydroelectric Power Corporation.
Coal India’s unions are against the 10% divestment, which needs to be resolved by the government. The Finance Ministry is working on getting together Coal India and Indian Oil issues, which may take place by October 2013.
(July 30, 2013)