IOC, BPCL May Have To Raise Debt If They Buy Government’s Stake In GAIL

IOC, BPCL May Have To Raise Debt If They Buy Government’s Stake In GAIL

Indian Oil Corporation Ltd. and Bharat Petroleum Corporation Ltd. will have to borrow funds if the state-owned refiners and marketers acquire the government’s stake in GAIL (India) Ltd., the nation’s largest gas marketing and transportation company.

India’s top two state-owned refiners could equally buy the government’s holding, newswire PTI reported, quoting unnamed people. The government’s 54 percent stake in GAIL is valued at close to Rs 40,000 crore.

IOCL and BPCL, however, are nearly Rs 23,000 crore short as the two, according to their September filings, had Rs 7,400 crore and Rs 9,500 crore cash, respectively.

This cash balance would have further reduced as both the companies had declared hefty dividends in the month of February. IOCL had declared a dividend of Rs 19 per share, while BPCL declared a dividend of Rs 14 per share. Also, in the past none of the companies in the last seven years ever had cash and cash equivalents of more than Rs 20,000 crore.

RS Sharma, former chairman and managing director of Oil and Natural Gas Corporation Ltd., isn’t sure how the two companies will benefit from such a deal. “Buying less than 50 percent stake in GAIL won’t benefit IOCL or BPCL in any way as it will not become subsidiary of either of them. Read More

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