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Govt may strip HPCL, BPCL reserves

P Vaidyanathan Iyer

The finance ministry plans to ask cash-rich petroleum public sector undertakings Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd to declare hefty dividends or issue bonus shares.

According to government officials, since the two oil companies have been lined up for divestment during the current financial year, the Centre will want to partly strip them of the huge cash reserves.

"Since the government is the owner of the two companies, the reserves and surplus technically belong to it," an official said.

While BPCL had reserves of Rs 37.80 billion as on March 31, 2001, and paid a dividend of 75 per cent in the last financial year, HPCL had Rs 61.47 billion reserves on March 31, 2001, and paid a 100 per cent dividend.

Officials said the divestment ministry would be consulted before a final view was taken on withdrawal of reserves and surplus. The move would also save the government any embarrassment of having sold off cash-rich companies.

The government is yet to decide on the quantum of equity it wants to sell in the two oil PSUs. The Cabinet Committee on Divestment had earlier decided not to allow IOC to bid for the two companies.

Officials said asking the two companies to declare a hefty special dividend was a better option. Issuing bonus shares will result in an expanded capital base. So, even a smaller dividend would mean higher income for the shareholders, they added.

If the reserves are not withdrawn, the valuation of the two companies will have to reflect their huge cash position. This will push up the valuation and the prospective bidders will have to shell out more.

The government is also eyeing the reserves of the Airports Authority of India, which is kicking off its global roadshow. Sources said AAI had reserves of about Rs 3-4 billion, which could be partially withdrawn before leasing the airports.

In the last financial year, the government had extracted Rs 22.50 billion from VSNL through transfer of cash reserves in the form of dividend.

It had also decided to transfer Rs 400 million and Rs 600 million, respectively, from STC India Ltd and MMTC Ltd.

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