CorporateONGC to raise $1 bn to service Imperial loan
Oil & Natural Gas Corporation (ONGC), India’s biggest energy explorer, plans to raise $1 billion (Rs 4,669 crore) in a month to refinance debt its unit incurred in the purchase of UK-based Imperial Energy Plc amid low interest rates.
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ONGC has tied up a dollar-denominated $200 million (Rs 933 crore) loan and plans to raise an additional $800 million (Rs 3,737 crore) by issuing bonds and selling commercial paper, D K Sarraf, director of finance, said in a telephone interview from New Delhi today.
The explorer is borrowing money to settle debt to take advantage of lower financing costs. ONGC follows other state-run oil companies Indian Oil Corp and Hindustan Petroleum Corporation in raising debt, as the Reserve Bank of India focuses on stimulating growth following the worst global economic crisis in 70 years.
“As a strategy, we wanted to have a longer-term loan as interest rates continue to stay low,” RS Sharma, CMD, ONGC, said. “A longer term loan can mean lower interest rates, too.”
ONGC gained 78 per cent this year tracking the growth in the benchmark Sensitive Index of the Bombay Stock Exchange. The shares fell 0.5 per cent to Rs 1,189.60 in Mumbai trading.
ONGC Videsh Ltd, the explorer’s overseas arm, sold one-year commercial paper to about 15 investors on January 9, paying 8.15 per cent interest, to partly fund the £1.4 billion ($2.3 billion) acquisition of Imperial, which has oil-producing fields in Siberia.
India’s Reserve Bank Governor Duvvuri Subbarao has kept the benchmark reverse-repurchase rate unchanged at a record low of 3.25 per cent since April. He said on December 9 that he may use monetary policy to stabilise inflation expectations if food- price increases persist “for a long time.”
Indian Oil, the nation’s second-biggest refiner, raised Rs 2,000 crore ($430 million) in July, according to Bloomberg data. Bharat Petroleum Corporation sold Rs 1,000 crore in October to fund capital expenditure, according to a statement by the refiner. Hindustan Petroleum raised Rs 1,000 crore selling three-year debentures offering interest of 7.35 per cent, B Mukherjee, director finance, said on December 2.