IOC to raise $900 m through overseas bonds issue to meet working capital needs; PSU to buy back 29.76 crore shares

New Delhi: State-owned Indian Oil Corporation (IOC) on Tuesday said it will raise $900 million through an overseas bonds issue to meet its working capital requirements. In a regulatory filing, the IOC said it has launched an international bonds issue of $900 million, carrying a coupon of 4.75 percent. The notes are expected to be settled by 16 January, 2019. “The notes carry a coupon of 4.75 percent per annum payable semi-annually. The notes will mature in 2024 and all the principal and interest payments will be made in US dollars,” it said. [caption id=“attachment_4292949” align=“alignleft” width=“380”] Representational image. News 18.[/caption] The IOC said the proceeds of the issue will be used to fund working capital requirements for the normal course of business. The bonds will be listed on the Singapore Exchange. Bookrunners for the issue are Citigroup, DBS Bank, SBICAP Securities, Standard Chartered Bank and Westpac Banking. The state-run IOC is buying back shares and is paying an interim dividend for the fiscal 2018-19, aggregating to Rs 11,000 crore. The board of the IOC last month approved buyback of up to 29.76 crore equity shares, or 3.06 percent of share capital, at Rs 149 per share aggregating to Rs 4,435 crore. It also approved payment of Rs 6,556 crore as interim dividend to shareholders. Fitch Ratings had last month stated that Rs 4,435 crore share buyback and Rs 6.75 per share interim dividend, together with funding requirements for the IOC’s capex plans to upgrade refineries for new emission standards and expansion of refining and petrochemical capacity, will drive up the company’s leverage. Its expected capex of Rs 23,000 crore in FY2018-19 and Rs 27,500 crore in FY2019-20 to result in continued negative free cash flow. The government is pushing the cash-rich PSUs to pay higher dividends and buy back shares using their reserves so as to help meet its budget deficit. The government, which holds a 54.06 percent stake in the IOC, is expected to participate in the share buyback. Besides the IOC, at least half a dozen other central PSUs have disclosed share buyback programmes. Prominent among these include ONGC, NHPC, Coal India, Oil India Ltd, BHEL, NALCO, NLC, Cochin Shipyard and KIOCL that could fetch the government a little over Rs 6,000 crore.

At the Rs 149 per share, the government is likely to get about Rs 2,400 crore by tendering some of its shares in IOC in the buyback.  Besides, out of the total dividend payout of Rs 6,556 crore, the government is expected to get Rs 3,544 crore plus the dividend distribution tax.

The Department of Investment and Public Asset Management (DIPAM), which has been set a target to raise Rs 80,000 crore for the government through stake sale in central public sector enterprises, had prodded all cash-rich PSUs to go for share buybacks. The PSUs having a net worth of at least Rs 2,000 crore and a cash balance of more than Rs 1,000 crore have to mandatorily go in for share buyback. Of the Rs 80,000 crore disinvestment target, the government has so far raised just over Rs 15,000 crore through minority stake sale in PSUs.     To keep watching India’s No. 1 English Business News Channel – CNBC-TV18, call your Cable or DTH Operator and ask for the Colors Family Pack (inclusive of 24 channels), available for Rs. 35/- per month, or subscribe to the channel for Rs. 4/- per day. To keep watching the Leader in Global Market & Business News – CNBC-TV18 Prime HD, call your Cable or DTH Operator and ask for the Colors Family HD Pack (inclusive of 25 channels), available for Rs. 50/- per month, or subscribe to the channel for Rs. 1/- per day.