Government-owned explorer Oil India has decided to restructure itself. Its board has floated a global tender to appoint a consultant to suggest ways to do it, sources directly involved with the development told FE.
It is learnt that global consultants such as Boston Consulting Group (BCG), Bain & Company, McKinsey & Company and Deloitte Touche Tohmatsu India, among others, have shown interest to take up the job. ?The tender is likley to be finalised in the next two weeks. The rejig would see overhaul of the entire company, including manpower management and deployment, structure of the firm, subsidiaries, financial allocation, etc,? said one of the sources.
?Many of the PSUs have operated on structures which are of incremental nature and there is a need for them to realign with modern international practices which certainly should go a long way in improving their productivity, efficiency and decision making ability atuned to the global environment,? said Kalpana Jain, senior director, Deloitte in India.
Oil India has lined up R19,003-crore investment in the 12th Five-Year Plan period. The company?s earnings per share declined to R49.6 in FY14 from R59.7 in FY13 led by a 6% decline in crude sales volumes and a 12% decline in net crude realisations.
?Nevertheless, an expected reduction in fuel subsidy losses and potential increase in domestic gas prices will support 16-18% earnings growth over the next two years,? Kotak Institutional Equities Research said in its report.
In FY14, crude oil sales volumes declined 5.8% year-on-year to 3.47 million tonnes while gas sales volumes remained steady at 2.09 billion cubic metres (bcm), an increase of 0.5% year-on-year.
?We believe that the frequent disruption of development and production activities due to strikes and blockades in Assam will not only lead to lower volumes for OIL in the given period, but may also put to risk our assumptions of modest growth in volumes over the medium term. We note that the company has modestly reduced its FY15 production target to 3.7 million tonnes of crude oil and 2.77 bcm of gas,? Kotak said.
OIL has set up a subsidiary ? Oil India International ? to look after its overseas operations. Currently, OIL is working on the process to transfer the overseas assets to the subsidiary company.
?While the new government is working to spur investments, it could move more quickly to resolve growth and regulatory hurdles in the
sectors. Clarity in gas pricing and resolution of the subsidy issue would be a material positive for upstream companies,? said Emkay Global Financial Services.