ONGC proposes to hike equity base of OVL

Oil and Natural Gas Corporation has proposed to hike the equity base of its overseas investment arm ONGC Videsh Ltd to Rs 5000 crore (Rs 50 billion), to bring down the high debt-equity ratio.

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"OVL's balance-sheet reflects Rs 12,000 crore (Rs 120 billion) debt on Rs 300 crore (Rs 3 billion) equity. This adverse debt-equity ratio sometimes raises questions when OVL goes for acquisition of oil and gas fields abroad," ONGC chairman and managing director Subir Raha told reporters in New Delhi.

ONGC has proposed to the petroleum ministry to increase the paid-up capital of OVL to Rs 500 crore from the current Rs 300 crore and the authorised capital to Rs 5,000 crore from the current sanction of Rs 1000 crore (Rs 10 billion), he said.

However, it is unclear whether the boost will come from fresh capital or whether interest-free loans from OVL's parent company ONGC would be converted into equity.

"This correction was long overdue. This will be more compatible with the size and profile of OVL," Raha said, adding OVL had been making aggressive acquisition bids overseas on the strength of interest-free loans from its parent firm ONGC.

The equity move would help OVL correct its debt-equity ratio, which is around 15:1.

Recently, OVL made heavy investments in Sudan and last week bought Shell's 50 per cent stake in Block 18 in Angola for $638 million.

Raha ruled out a public offering of shares of OVL in the near future. "ONGC has enough financial and technical strength to sustain overseas acquisitions."