We got the cabinet approval for dilution of our stake by 24 per cent the day before. This is a joint venture between Indian Oil Corporation and Lubrizol Corporation of USA, 50-50 joint venture and we had through this, the access to the lubricant additive technology of Lubrizol. The agreement has expired in 2014 and was due for the renewal.
So we negotiated with them. We wanted the latest world class lubricant additive technologies to be made available which are not available in India and Asia, at the same time we also thought of going for a strategic alliance on this agreement and monetise a part of our investment which was made in the year 2000 at a good price.
So both the purposes were achieved. We were able to monetise a part of this investment. At the same time, we are able to keep the joint venture agreement for a long term with the latest technologies being made available.
Our technology which is developed by our R&D will also be made available to the joint venture on which we will earn the royalty. So it is a win-win situation for both the corporations.
How much money have you received from this stake sale, you mentioned 24 per cent stake you sold?
Our investment in the joint venture in 2000 was Rs 119 crores so we have sold slightly less than half of our holding, we have sold it at a good premium. We have made more than whatwe invested by selling the part of the stake, it is more than 200 crore what we have made.
So that one-time other income will come in this quarter or the next quarter?
The entire transaction processing will take time so I think it will come in the next quarter.
About your ambitious CapEx plan, we have that you are planning to invest about rupees two lakh crore. Can your balance sheet afford that?
Yes because this two lakh crore plan is for over the next five to seven years and in fact you look historically we have been investing almost 15,000 crores every year on our CapEx for last three to four years. In fact this year the total CapEx will be around 20,000 crores itself by the time we close the March and next year again it is going to be around 20,000.
With that pace, I think in seven years it is very much doable and very much within the normal CapEx plans of IOC.
Aren’t you being a little more ambitious with the plan of rupees two lakh crores over seven years, are you extending your own run rate on expansion?
Rs 20,000 is the figure today. When you look at the seven years, the Rs 20,000 may go up to Rs 30,000- 35,000 when the year passes.
Rs 2 lakh crore is very much doable, we have done our back end calculation and we find that our balance sheet is in a position to support all that investment. It has, in fact, supported that investment. Five years ago, our investment used to be Rs 8,000 to 10,000 crore which increased to the Rs 15,000 crore and now to Rs 20 crore. So with this pace, Rs 2 lakh crore is definitely doable and we have the plans in place. Read More…