The IOC board has approved the share swap ratio for merging IBP into its fold. The swap ratio has been proposed at 1.25:1. This means IBP shareholders will get 125 shares of IOC for every 100 shares held by them.
Separately, the IOC board today declared an interim dividend of 45% (Rs 4.50 per share), an official said.
With IOC deciding to maintain IBP as a separate brand, its retail stable will thus offer two brands of autofuels.
Speaking to reporters IOC chairman M S Ramachandran said: "IBP will function as a division of IOC. IBP petrol pumps network would continue to be expanded along with our own network."
As per the current shareholding pattern of IBP, 17.28% is held by the public at large while IOC has a stake of 53.58%. Institutional investors have the balance 29.14%. IOC will issue fresh equity to the tune of 2.76 crore shares to the existing IBP shareholders.
The swap ratio has been based on the share prices of the two companies in the last six months and the valuation of the companies. IBP closed at Rs 616.50 at NSE today while IOC closed at Rs 517.95 at NSE.
"It is a very fair arrangement to my mind. We took into account six months average to decide the ratio. On current prices the swap should have been 111:100 but our ratio has been generous towards IBP shareholders," Ramachandran said.
The proposal will have to be vetted by the petroleum ministry before it is kicked off. The whole process of merger will take almost three to four months. IOC hopes to complete it by the end of this fiscal, Ramachandran said.
IOC's own holding in IBP will be transferred to a trustee who will sell the IBP shares through a secondary issue to the general public. The whole process will increase the public holding in IOC to about 11% from the present level of 8%.
IOC bought government's 33.58% equity in IBP in 2002. It further acquired another 20% through an open offer to make the standalone marketing company its subsidiary.
The government stake in IOC in the bargain will come down by 1.91% to 80.12% from 82.03%.
The merged entity (IOC and IBP) will have an equity capital of Rs 1,196 crore, up by about Rs 26 crore. IOC has a networth of Rs 23,047 crore and reserves of Rs 21,879 crore while IBP has a networth of Rs 626 crore and reserves of Rs 604 crore. The merger will increase IOC market share to 61% in the autofuel segment.
"We will save on transaction cost on stock (petroleum products) IOC transfers to IBP for sale through its network, as a result of the merger," Ramachandran said.
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