Amid volatility in the stock market, the government today decided to postpone its 5% stake sale in state-run oil and gas explorer ONGC , that would have fetched the exchequer about Rs 12,000 crore.
"The government has decided not to proceed for the time being with further public offer of 5% paid-up equity shares of Oil and Natural Gas Corporation Ltd (ONGC) through an offer for sale," a finance ministry statement said without assigning any reason.
The follow-on public offer (FPO) was to open on September 20 and roadshows for the same were to begin a day before. Adding that government believes in ONGC's inherent strength, it said, "the decision will be evaluated in due course keeping in view all relevant factors."
Earlier in the day, the oil and gas major had made a similar communication to the stock exchanges. Shares of ONGC surged 5.61% to close at Rs 274.70 on the BSE following the communication. While no new date was given for the FPO, sources privy to the development said it is off for at least two weeks.
The Finance Ministry further said "significant work has been done by all involved (in the FPO)... The Government remains committed to the disinvestment programme." The government plans to sell its 5%, or 427.77 million shares, through the offer. After the FPO, it's stake in ONGC will come down to 69.14% from 74.14%.
The ONGC offer was part of the government plan to raise Rs 40,000 crore through stake sale public sector units in the current fiscal. As part of its disinvestment programme, the government has already approved equity sale in SAIL and Hindustan Copper.
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Volatile stock market conditions is forcing the government to delay stake sale in these entities. Global equity markets have been on a downside on fears of a slow recoveries in the Eurozone economies as well as the debt crisis in the US.
The ONGC FPO was originally planned in the 2010-11 fiscal, but the launch was later deferred to April 5, as the company did not have an adequate number of independent directors on its board to meet market regulator SEBI's listing norms.
It was then rescheduled for July 5, but was again deferred due to adverse market conditions.