NEW DELHI: India said it plans to auction a five percent stake in state-run energy giant Oil and Natural Gas Corp (ONGC) on Thursday, a move that could fetch the government about $2.5 billion.
The announcement sent shares in the country's largest oil and gas producer surging nearly five percent on the Bombay Stock Exchange Wednesday before they eased to sit 3.65 percent up at 293.90 rupees in early afternoon.
The sale marks the restart of India's privatisation drive which was halted last year due to weak markets and is aimed at helping the government raise money to narrow a gaping fiscal deficit and fund social welfare schemes for the poor.
The shares will be divested through an auction to institutional investors rather than a public share offering, Oil Minister Jaipal Reddy said late Tuesday.
Analysts say the auction route is a swifter way to raise money than through a public offering as it involves little paperwork, avoids elaborate road-shows and the whole process can be completed in just one trading day.
The sale of the shares priced at 290 per share would fetch the government around 118 billion rupees ($2.5 billion).
India delayed plans several times in 2011 to sell shares in ONGC due to a sagging stock market but prices have rebounded this year, with the Sensex in Mumbai up almost 15 percent since the start of January.
Analysts have said they see strong demand from domestic as well as foreign institutional investors.
The government owns 74.1 percent of ONGC and the auction would see it offload 427.7 million shares, reducing its holding to 69 percent.
The Congress-led government had hoped to raise as much as 400 billion rupees by disposing shares in state-run companies in the financial year to March 31, but it has so far raised just 11.5 billion rupees.
Analysts expect India's fiscal deficit to exceed its budget estimate of 4.6 percent of gross domestic product by around a percentage point due to weaker revenues as economic growth slows.
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