Oil ministry yet to decide on allowing oil PSUs to buy ADB stake

Gas utility GAIL, refiners IOC and BPCL and exploration firm ONGC have already informed ADB of their decision to exercise their Right of First Purchase/Refusal on the multilateral lending agency’s stake

New Delhi: The oil ministry is yet to decide on allowing GAIL India, Indian Oil Corporation, Bharat Petroleum Corporation and Oil and Natural Gas Corporation (ONGC) to acquire the Asian Development Bank’s (ADB) stake in Petronet LNG (PLL), reports PTI.

“We have received requests from all the four companies (who are promoters of Petronet) for buying ADB’s (5.2%) stake. We are yet to decide on it,” oil secretary GC Chaturvedi told reporters here.

The ADB had on 23rd August offered to sell its 5.2% stake in PLL, in which the four state-owned oil and gas companies hold a 12.5% stake each.

Gas utility GAIL, refiners IOC and BPCL and exploration firm ONGC have already informed ADB of their decision to exercise their Right of First Purchase/Refusal on the multilateral lending agency’s stake.

“We are debating on the issue. If allowed, the stake of the four PSUs will rise above 50% in PLL, which will some implications like the company coming under purview of CAG audit,” he said.

However, he hastened to add that PLL coming under the CAG was “after all, not a bad thing”.

The oil secretary is also the chairman of Petronet.

Gaz de France International (GDFI) holds a 10% in PLL and also has the right of first refusal over ADB’s stake.

In case the French energy giant also decides to exercise its right, ADB’s 5.2% stake will split between the five partners in proportion to their current shareholding.

While the state-run Indian firms would get 1.08%, or 81.25 lakh shares each, GDFI would be eligible for a 0.867% stake.

Sources said GDFI is unlikely to exercise its right and if that happens, ADB’s 5.2% stake will be split equally among the four PSU promoters.

The price payable to ADB would be the lower of either the average of the weekly high and low of the closing price of PLL during the six months preceding the date of purchase, or the average of the weekly high and low of the closing price of PLL during the last two weeks preceding the date of purchase.

For 81.25 lakh shares, the consideration works out to about Rs120 crore, sources said, adding that the promoters, as per the new Takeover Code, would have to make an open offer for acquiring a further 26% stake from minority shareholders if they buy the shares in one transaction.

PLL’s constitution states that participation of PSUs would be to the extent of 50% and the joint venture company would not be a government company.

Sources said the legal opinion taken by the promoters states that PLL would not be considered a government company following an acquisition of additional equity by the PSUs from ADB.

Sources said PLL would not turn into a PSU following the acquisition of stake by the PSUs because neither of the conditions specified in Section 617 of the Companies Act would be met.

The conditions are that at least 50% of the paid-up capital of PLL should be held by the central government or by one or more state governments, or PLL should be a subsidiary of a government company.

The immediate fallout of the acquisition would be that PLL would come under the purview of government agencies like the CAG, they said.

The state-run firms have argued that the acquisition of shares offered by ADB will result in securing controlling interests in PLL.

As PLL has got long-term plans to increase its capacity in more locations, additional investments in PLL will help the promoters grow their gas business, they said.

Also, on their initial investment of Rs99.37 crore, the promoters have been rewarded by a dividend of Rs77.3 crore till date. Besides, the investment has appreciated manifold from Rs99.37 crore to Rs1,500 crore at current market prices.

There was a possibility that in case the promoters decide to waive their right of first purchase, the entire equity stake being divested by ADB may be acquired by GDFI, thereby increasing its equity stake to 15.20% and making GDFI the single largest shareholder in PLL.

The ADB had in fact first proposed to exit PLL in 2008, but then company CEO Prosad Dasgupta was in favour of a third party like Chevron or steel baron Lakshmi Mittal’s group buying the stake instead of the four promoters.

Sources said Mr Dasgupta had on 29 February 2008, written to then GAIL chairman UD Choubey to say that sale of ‘even one share’ held by ADB to the four promoters or Gaz de France (GdF) would trigger the Takeover Code, turn the joint venture into a state-run firm and may result in delisting from the bourses.

The ADB and German Development Bank KfW had in 2008 approved a loan of $169 million to Petronet for its expansion projects at Dahej and new terminal at Kochi, but the multilateral lending agency’s internal norms prohibit it from having both debt and equity exposure in a company.

“In 2004, ADB had sanctioned a $75 million loan to Petronet. But once it took a 5.2% stake for less than $8 million, ADB could not disburse the balance due to its internal regulations,” a source said.

ADB norms also stipulate that it divest its equity holding in a company three years from the date of the company going public. Petronet’s IPO came out in 2004 and the ADB was supposed to exit Petronet in 2007, but was persuaded to stay on.

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Hindi TV channels triumph over regional counterparts

TAM’s 2010 study finding contrasts with growth of regional print industry

According to television viewership survey agency TAM’s study titled 'The Impatient Generation'~ TV Consumption Behaviour Study 2010, Hindi general entertainment channels (GEC) share has gone up, while regional GECs have taken a beating.

“Elderly women, housewives and kids with higher engagement time are showing more loyalty in terms of less switches or switches only within preferred genre(s). Chief-wage earners and youth are increasingly becoming more unpredictable by either watching less or switching across genres in an attempt to settle down on their content choice. This has proved beneficial for GECs, kids and big sports events or movies genre to grow while news, infotainment and music have come under some pressure,” said LV Krishnan, chief executive officer, TAM Media Research in the introduction to the report.

During 2009, Hindi channels comprised 42% of the total number of channels, and its share increased to 44% in 2010. Regional channels, on the other hand, observed a 2% drop to 34% from 36%. Hindi GECs were commanding 26.9% of viewers in 2009, but in 2010, it increased to 29.6%. In the Hindi speaking market, the share rose from 38.4% to 41.5%; while in the southern markets, Hindi GEC viewership increased to 4.7% from 4.4% the year before. Viewership of regional GECs, however, declined from 24.2% to 22.9%.

Overall, it is at odds with the print news readership trends, which have seen more regional players, emerge with increasing popularity. India Readership Survey shows that regional editions and magazines are becoming more popular, yet there seems to be no new entrants in news channels section.

There have been some 13 new entrants in the television world, with most of them belonging to the GEC, music or movies segment. Lifestyle had three new entrants.

However, the survey hints at increasing fragmentation. Apart from Tamil Nadu and Kerala, which have a most focused viewership of 13 channels, which account for 80% of viewership, all other states are witnessing fragmentation. However, over all, across India and the Hindi speaking market, viewership fragmentation remains unchanged.

“While expectedly with increasing number of channels (530+ in India, last count), the choice of content for the audience is also on increase but the much awaited hype of even more fragmented audience has not necessarily come true. This is because of two reasons: the analog distribution networks are running brim to capacity and hence are adding new channels only at the expense of old ones. So new channels are adding audiences only on the digital platforms, where we will see growing fragmentation. However, given analog’s 75% market share, fragmentation in decelerating. Secondly, market leaders in broadcasting with deep pockets are bringing high quality content. This has enabled them to skew audiences to few of the programs, bringing in higher returns. Thus we see two polarities in audience aggregation: few programs engaging large set of audiences on one side and a large set of programs engaging few audience on the other,” the report quoted Mr Krishnan.

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ONGC withdraws papers for FPO, will file again if govt asks

“This (withdrawal of RHP) is technical. The document filed in September had a validity of 90 days and so we have withdrawn it... It is no reflection if the follow-on offer (FPO) is coming or not,” ONGC CMD Sudhir Vasudeva told reporters

New Delhi: State-owned explorer Oil and Natural Gas Corporation (ONGC) has withdrawn the papers it filed for a government share sale, but will file the red herring prospectus (RHP) again if instructed, reports PTI quoting chairman and managing director Sudhir Vasudeva.

“This (withdrawal of RHP) is technical. The document filed in September had a validity of 90 days and so we have withdrawn it... It is no reflection if the follow-on offer (FPO) is coming or not,” he told reporters here.

“If and when required, we will file it again,” he said, adding that the timing will have to be decided by the Department of Disinvestment (DoD).

ONGC had in September filed the RHP for the follow-on public offer (FPO) through which the government plans to sell a 5% stake, or 427.77 million shares, in the company. The FPO was to open on 20th September, but was put off days ahead of its opening due to market uncertainty.

“We are ready for the share sale as and when it is decided by the DoD,” Mr Vasudeva said.

After the FPO, the government’s stake in ONGC will come down to 69.14% from the current 74.14%.

The government plans to raise at least a fourth of its Rs40,000 crore divestment target for the current fiscal from the 5% stake sale in ONGC.

The share sale has been deferred several times this year.

It is expected to happen in December, but this is unlikely because the company does not meet market regulator Securities and Exchange Board of India’s (SEBI) listing norm for half of its board to be made up of independent directors.

Three of ONGC’s directors—S Balachandran, SS Rajsekar and Santosh Nautiyal—ceased to be directors on the company’s board on 10th November after expiry of their three-year term.

Their replacements are yet to be named as the proposal is awaiting a nod from the Cabinet Committee on Appointments (ACC).

“I believe the selection process for the three independent directors has started and is in final stages,” Mr Vasudeva said, adding that the timing of the FPO will be taken by the Department of Disinvestment.

Oil secretary GC Chaturvedi said his ministry has agreed to the DoD’s proposal for sale of a 10% stake in Oil India, the nation’s second-largest state explorer after ONGC.

“We have agreed for an FPO of OIL after the share sale in ONGC is completed,” he said.

The government owns 78.4% of OIL.

“They (DoD) asked us about the FPO in OIL and we said we agree to it,” he said, adding that the timing would be decided by the DoD.

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