The head of the state-owned refining and marketing company has cautioned that the timing to disinvest 10 percent of government equity is not right due to the "prevailing uncertain environment".

According to a news report published in Indian Express, IOC chairman RS Butola, in a letter written to petroleum ministry last Saturday, has warned that the share sale could fetch a low price and would further dent his company's effort to raise loans for crude oil imports.

Just days ahead of roadshows starting October 3, Butola wrote, “Current share price of IOC, already undervalued, may not fetch the fair value in the prevailing uncertain environment and investors in all probability are likely to factor in huge discount in their assessment of share price." He expressed strong view that the current timing of the disinvestment is not in the interest of all stakeholders.

The feedback during IOC's borrowing drive was that there was 'serious liquidity constraint' and loans were available at high cost, he wrote. He added that lenders also have similar concerns for downstream oil firms as being experienced by equity investors. Moreover, lenders/investors have sector and country limits which for India are already well exposed.

"Our interaction with merchant bankers and research analysts revealed that investors are concerned about prevailing uncertainties such as lack of transparent under-recovery sharing mechanism, fluctuation in profitability, liquidity constraints, implementation of the export parity pricing regime," he wrote.

Adding to this domestic ambiguity was the uncertainty over the response of the US Federal Bank on quantitative easing of US fund raising as well as India's macroeconomic woes of high fiscal deficit, depreciating rupee and declining growth.

"As a direct consequence, the investors are hesitant in investing in emerging market economies, which causes further strain on appetite of funds, making fund raising from international market more difficult," he cautioned.

He added, “IOC posted a loss of Rs 3,093 crore in the first quarter of the current fiscal and prospects for the second quarter do not look bright due to unprecedented rupee depreciation and lower downstream margins.”

"In view of the above, our concern is that if the disinvestment is still pursued and it faces low response or attracts low valuation, it will have further debilitating impact on our standing in the financial markets and erode our capacity to raise further funds to tie up working capital and other needs," wrote Butola.

IOC had earlier too asked for a deferment and the department of disinvestment had agreed to consider their concern at a meeting on September 26. However, a day before that meeting, the DoD conveyed that the roadshows would start from October 3.

If conducted, the share sale would fetch Rs 4,600 core as the IOC share price — currently trading at Rs 208 — is likely to be fixed at a discounted Rs 190.