The offering is proposed to be done by HPCL's larger shareholders like the Unit Trust of India and Life Insurance Corporation which jointly hold an estimated 20 per cent stake in the oil PSU. The idea is to allow them to offload their stakes abroad which will help them rake in money and give international listing to HPCL.

Sources say that this, in turn, will give the navratna access to funding avenues overseas. There is no way it can consider a primary GDR issue as government holding is already down to the minimum 51 per cent level. "HPCL cannot think of an international offering unless privatisation is on the Centre's agenda which is clearly impossible to conceive at present," they add.

The secondary GDR concept was mooted by some top investment bankers nearly two years ago when UTI's own holding in the corporation was close to 20 per cent. At that time, the finance ministry was not very enthusiastic about the idea as it would have invited similar requests from other companies both in the public and private sector.

In the meantime, UTI's stake in HPCL has come down to less than 15 per cent today because of some selling effected during the last year. It would make very little sense to go in for a secondary GDR offering with such a small chunk and, hence, the move to rope in LIC also as it has a stake of around five per cent. "A combined 20 per cent would at least justify going in for this issue as there is a large investor base to be covered," sources say.

Talks have been held for the last year between HPCL, UTI and the finance ministry and the outcome has not been very encouraging. The fact remains that this would not only help HPCL but also UTI (and LIC) which stands to make some money. The problem lies in the concept as giving a go-ahead would mean that the finance ministry will need to rework some basic rules.

The 51 per cent figure, representing government stake in HPCL, also precludes the corporation from considering an ADR issue and, consequently, a listing on the New York Stock Exchange. Indian Oil Corporation has already kicked off this exercise where a part of its future GDR proceedings will be converted into ADRs and, consequently, an NYSE listing becomes possible.

HPCL has reasoned that since this avenue is also blocked at a time when an international stamp would be of immense help, the secondary GDR offering is the best bet. The next option would be to await some notification from the Centre stating that its stake in HPCL would be pared to 26 per cent during the next three years.

For the moment, this seems unlikely though it is one of the recommendations of the Hydrocarbon Vision 2025 report which stipulates that the government should retain IOC, ONGC and GAIL as its flagship companies post-2002 when the oil sector will have been completely deregulated. In other oil PSUs like HPCL or BPCL, the panel suggested that the Centre make a gradual exit before the onset of market-determined pricing.