No equity investor for OPaL, ONGC likely to buy ?5,615 crore CC Debentures

25-Jun-19

After failing to find an equity investor for its petrochemicals arm -OPAL, Oil and Natural Gas Corp. Ltd (ONGC) might consider buying ?5,615 crore worth of compulsorily convertible debentures (CCDs) of ONGC Petro additions Ltd (OPaL), as per sources. CCDs are financial instruments that have the feature of compulsory conversion into equity as per terms and are treated as quasi-equity. The CCDs have an unconditional and irrevocable mandatory put option on OPaL’s sponsors, ONGC, for the buy-out of the CCDs at the end of the 35th month from the deemed date of allotment, as well as the undertaking to fund the coupon payment, according to the terms of issuance. The sponsor would also have the right to buy out the CCDs at the end of the 24th, 30th, and 35th months from the deemed date of allotment, according to corporate filings. The CCDs have a tenor of 36 months from the deemed date of allotment and do not have any conversion option for the period it is held.

The planned tranche of CCDs issued in 2016 is part of a ?7,286-crore CCD programme of OPal, a joint venture between ONGC (49.4%), GAIL (India) Ltd ( 49.2%), and Gujarat State Petroleum Corp. Ltd (1.4%). OPaL used the proceeds to partially finance project expenditures and repay loans. Extending the tenor of the CCDs could be an option that ONGC board could consider.