Oil and Natural Gas Corporation mulls investing $3 billion in the initial public offering of Russia's Rosneft, the Moscow-based firm has warned potential investors that they face numerous risks, including uncertain tax laws and economic instability.
Rosneft's IPO prospectus contains 25 pages of 'risk factors', including those stemming from the acquisition two years ago of Yuganskneftegaz, its main production asset, purchased in a forced auction from Russian rival Yukos.
The prospectus also warns about the potential hazards of investing in Russia, with minority shareholders likely to be offered little protection under Russian law.
Rosneft is also embroiled in legal challenges, it adds, while company auditor Ernst & Young acknowledges that Rosneft's accounting systems may be relatively unsophisticated.
Petroleum Secretary M S Srinivasan on Wednesday stated that ONGC had two more weeks to decide on investing in the $11.6 billion IPO to take upto 5 per cent stake.
The prospectus states that 'weakness relating to the Russian legal system and Russian law create an uncertain environment for investment and for business activity' and lists inconsistencies among federal laws; decrees, orders and regulations issued by the President, the government, federal ministeries and regulatory authorities; and regional and local laws, rules and regulations.
Besides a high degree of discretion on the part of governmental authorities and substantial gaps in the regulatory structures have also been pointed out.
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