In a significant development for the Indian Oil Corporation (IOC), the company has announced the withdrawal of its ₹22,000 crore rights issue. This decision follows the Ministry of Petroleum & Natural Gas’s (MoP&NG) communication that no funds have been allocated for capital support to Oil Marketing Companies (OMCs) in the 2024-25 budget. Initially, IOC had approved this capital raise through a rights issue, as per a notification dated July 7, 2023. However, after a board meeting held on September 30, 2024, the decision was reversed due to the government’s omission of previously proposed budget allocations.

The backdrop of this decision lies in the earlier anticipated allocation of ₹30,000 crore for OMCs, which was ultimately excluded from the final budget. IOC's board concluded that the non-participation of the government as a promoter in the rights issue necessitated the cancellation. The company stated, “In this regard, we would like to inform that the MoP&NG has conveyed that no funds have been allocated for capital support to Oil Marketing Companies in the Budget 2024-25, as against the earlier proposed allocation of ₹30,000 crore. Therefore, in view of the Government of India’s (Promoters) non-participation in the Rights Issue, the Board at its meeting held on 30.09.2024 has decided to withdraw the proposed Rights Issue of equity shares.”

This unexpected withdrawal has raised concerns within the market and among investors about the future of funding for key players in the petroleum sector. The financial landscape for OMCs has become increasingly precarious, especially given the government’s withdrawal of support. Stakeholders are now questioning how IOC and similar companies will manage their capital needs without this essential funding avenue.

As the situation evolves, it's crucial for investors and market watchers to stay informed about the latest developments in the oil and gas sector. The implications of this decision could resonate throughout the industry, affecting everything from share prices to capital investments in infrastructure and operational capabilities for OMCs.

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