Govt may wait for subsidy formula before ONGC offer

* BHEL invites applications from bankers; ONGCs stake sale set for another delay.

One step forward,two steps backwards that seems to be the governments move on disinvestment in public sector firms.

Even as state-run Bharat Heavy Electrical Ltd (BHEL) on Monday invited applications from merchant bankers for managing its follow on public offer (FPO) public sector ONGCs stake sale seems to be set for another delay.

ONGC was expected to file its red herring prospectus this week,but indications are that the government may wait to finalise the subsidy sharing formula before launching its public issue.

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A decision on the oil subsidy sharing formula for 2011-12 will make the company even more attractive for investors. A final call on when the follow-on public offer (FPO) will be scheduled is yet to be taken, a person familiar with the development said.

Though the government hiked prices of fuel last month a move that will help the companys profits a decision on the subsidy sharing formula will give investors more clarity on its balancesheet,the person said.

The government plans to sell 5 per cent stake in ONGC,or 427.77 million shares through an FPO which is expected to fetch nearly Rs 11,500 crore. The companys board of directors approved the red herring prospectus on July 29. The issue will hit the market within three weeks of filing the prospectus with market regulator Sebi. ONGCs follow on issue was earlier scheduled to hit the markets in February but was postponed to April and then to July 5. But it was deferred once again as it did not have the requisite number of independent directors.

Meanwhile,equipment manufacturer BHEL has invited bids from merchant bankers for its proposed FPO consisting of 5 per cent disinvestment of government equity. Interested parties have been asked to submit their bids by July 15. Shortlisted candidates would be expected to hold presentations on July 18 and 19 based on which a consortium of book running lead managers would be set up. The department of disinvestment is expected to seek Cabinet approval for BHELs issue this week,which is expected to fetch Rs 4,500 crore. However,the timing of the issue is yet to be decided.

Long wait

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* ONGC was expected to file its red herring prospectus this week,but indications are that the Centre may wait to finalise subsidy sharing formula before launching its public issue

* A decision on the subsidy sharing formula is expected to give investors more clarity on ONGC’s balancesheet

* ONGCs follow on issue was earlier scheduled to hit the markets in February but was postponed to April and then to July 5

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