Due diligence needs to be rigorous: TK Ananth Kumar, Director, Finance, Oil India Ltd
TK Ananth Kumar, Director, Finance, Oil India Ltd says the company is not averse to taking risks while making investment decisions. But such decisions cannot be made on impulse.
The government is concerned that state-run companies are sitting on huge piles of cash and not investing in projects. How far is this a valid concern?
Any commercial firm takes investment decisions to enhance shareholder value. We are not an exception. We have to carefully assess business opportunities and business environment before taking investment decisions. In case of PSUs the due diligence is even more rigourous because it is the government’s money or public money. Private firms can be more aggressive as they don’t have to answer to the government if their venture fails. In Oil India, we are very careful.
Does this mean you are averse to taking risk?
You may have seen in 2008 that it was the public sector that shielded Indian economy from adverse impact of global meltdown. So it is wrong to say that we do not take risk. Last month Oil India and Indian Oil Corporation jointly acquired stakes in Carrizo Oil & Gas Inc’s rich shale assets in the Denver -Julesburg basin in Colorado. This is OIL and IOCL’s first shale acquisition in the United States. More are in the pipeline.
What is the financial position of Oil India, in terms of surplus?
We are cash surplus company, with about Rs 13000 crore. But being an E&P firm, we have to continuously invest in projects, equipment, seismic surveys, drilling etc. Our 12th Five-Year Plan budget is Rs 19,000 crore. This excludes acquisitions and diversification.
The government plans to sell its 10% stake in the company. What is the progress?
The government is the promoter and it is selling its stake. We are only the facilitators. All crucial decisions are taken by the Ministry of Finance, Department of Disinvestment and the Oil Ministry. We hope the government will launch the issue in an appropriate time.