Indian Oil Plans $2.5 Billion January Share Sale to Cut Debt, Fund Growth

Indian Oil Corp., the nation’s second-biggest refiner, aims to raise $2.5 billion in a proposed share sale to lower debt and fund expansions.

The state-owned fuel producer has debt of about 450 billion rupees ($10.1 billion), Chairman Brij Mohan Bansal said in an interview in New York yesterday. “We also plan to use part of the money to fund our ongoing expansion plan.”

The Indian government said in January it plans to sell shares in as many as 68 companies as part of efforts to shrink the budget deficit to 5.5 percent of gross domestic product this fiscal year from an estimated 6.9 percent last year. Prime Minister Manmohan Singh wants to raise 400 billion rupees from asset sales by March 31 to also help fund construction of roads, ports, hospitals and schools.

The company last month approved the sale of as many as 242.8 million shares, or 10 percent of its equity, through a public offer along with the government share sale.

“We are in the process of appointing the lead managers and bankers,” Bansal said. He expects government approval for the plan “soon” and to hold the share sale in January, he said.

Indian Oil is building a refinery in Orissa state with an annual processing capacity of 15 million tons. The company plans to spend $10 billion on expansion, Bansal said.

The refiner has advanced 38 percent in Mumbai trading this year compared with the 17 percent gain in the benchmark Sensitive Index of the Bombay Stock Exchange. The stock climbed 1.2 percent to 420.6 rupees yesterday.

Bansal said that crude oil prices will likely range between $70 and $80 a barrel by the end of this year. Benchmark futures have climbed 17 percent in New York the past year and traded at $82.66 at 5:22 a.m. New Delhi time today.

The increase in crude prices has forced the company to slow its overseas expansion, he said.

“We had very optimistic plans for overseas, but because of oil prices and subsidy issues we have kept our overseas ventures in Indonesia and Malaysia on the backburner,” Bansal said. “If opportunities are there, our first target will be Africa.”