ONGC's bid for Mangalore Refineries goes to PIB

Vol 6, PW 22 (15 Jan 03) People & Policy

WHEN THE PUBLIC Investments Board meets on 22nd January it will have before it a 25-page recommendation from oil ministry joint secretary refineries Shivraj Singh to justify ONGC's move to take a majority stake in the loss-making Mangalore Refineries.

ONGC wants to buy the entire 37.38% equity stake owned by the Aditya Birla Group and to later raise its equity stake to 51% with management control of the part state, part privately owned refinery. ONGC is paying Rs2 per share on a face value of Rs10, totalling Rs59.43cr ($12.2m).

ONGC wants to acquire the balance 13.62% stake through a debt-restructuring package agreed with the refinery's lenders. Details of the package read like this: ONGC will pump in Rs600cr ($124m) for its 51% stake.

This Rs600cr will go towards paying back some of the refinery's Rs4, 375.44cr ($909m) debt. The remaining loans will be "restructured" through the issue of equity shares or bonds or preference share capital worth up to Rs525cr ($109m).

Of this amaximum Rs365cr ($75m) will be for equity capital. ONGC will have the right to purchase a part or whole of this equity within five years at par value of Rs10 "compounded annually at 10.08%".

After this exercise any outstanding loan repayments on the principal amount will be frozen for four years. "After this moratorium there will be gradual increases in repayment instalments as well as interest rates so that there is sufficient cash available to repay the loans." MRPL's lenders have also agreed to reduce the "weighted average interest rate on the outstanding debt "to 9.15% from the present 13.75%.

In sum, it looks like a pretty good deal for ONGC!