Tuesday, 21 February 2012

News Hour- Big foreign funds assure to buy 5% stake sale in ONGC; govt to raise Rs 12000 crore

MUMBAI: Overseas investors, including sovereign funds from Abu Dhabi and Kuwait, have assured the government they would buy up the proposed 5% stake sale in Oil & Natural Gas Corp, setting the pace for accelerated divestment in cash-rich companies by a funds-starved government.

Representatives of various funds from Singapore, the Middle East and London, who met finance ministry officials last week, have informally 'underwritten' the stake sale in the state-run company that could help the government raise about Rs 12,000 crore at current market valuations, three people familiar with the discussions between the government and investors said.

Officials of Kuwait Investment Authority and Abu Dhabi Investment Authority were part of the team that discussed the issue with finance ministry bureaucrats. Representatives from CalPERS, the giant California pension fund, and Prudential, are also believed to have attended the meeting but this could not be immediately confirmed.

The government plans to soon sell 5% stake in ONGC. The spokespersons for the various funds could not be reached independently for comments.

These assurances from investors come amid promises that the forthcoming budget will address many of the macroeconomic issues such as fiscal deficit and other long-pending reforms, those people said.

"Many of the Middle East sovereign funds are comfortable with the oil and gas sector as an asset class and would prefer to invest in companies in that industry," said C Jayaram, joint managing director at Kotak Mahindra Bank.

The government, which is set to miss its Rs 40,000-crore target from disinvestment of stakes in PSUs for the year ending March, is accelerating plans aided by a change in rules.
The government could not get wider investor participation through the traditional way of public share sales but will now be able to sell its stake through auctions in stock exchange windows. A handful of wealthy investors could ensure success even if the rest of the investing community stays away.

Foreign investors have so far bought stocks worth $4.8 billion this year, pushing the benchmark Sensex up 18%, making it the best-performing index in Asia.

The Sensex is up 21% from the December lows, taking it technically into a bull market. Apart from the attractive valuations after a 37% fall last year in US dollar terms, assurances about India's fiscal health by top government officials in a conference call with global fund managers has helped improve sentiment. Last year, foreign funds net sold $357 million of stocks.

Funds from the Middle East are keen on buying into infrastructure assets, especially oil and gas, backed by their expertise in the industry and fewer opportunities in Europe due to the sovereign credit crisis. Abu Dhabi Investment Authority is also buying into corporate debt, people with knowledge of the development said.

Kuwait Investment Authority has already allocated $1 billion for investments in public equities through mutual funds that includeICICI Prudential, Franklin Templeton, Canara Robeco and DSP BlackRock.

A ministerial team from Abu Dhabi, which bailed out Dubai during the last crisis, had visited India three weeks ago to discuss investment opportunities and met up with government officials in New Delhi and some bankers in Mumbai.

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