Oil India, the second largest national oil & gas company IPO opens today

Oil India, the second largest national oil & gas company, is coming out with an initial public offering (IPO) of 26,449,982 equity shares of face value Rs 10 each. Its issue price has been fixed at Rs 950-1050 per equity share and it will raise around Rs 2,512.75-2,777.25 crore.

The issue comprises a net issue to the public of 24,045,438 equity shares and a reservation of 2,404,544 equity shares for subscription by eligible employees, at the issue price. The issue shall constitute 11% of the fully diluted post-issue capital of the company.

It is engaged in the business of exploration, development, production and transportation of crude oil and natural gas onshore in India. It also processes produced natural gas to extract LPG.

The objects of the issue are to fund requirements for fiscal 2010 and 2011 towards exploration and appraisal activities; development activities in producing fields and purchase of capital equipments and contracts for facilities.

The government (the president of India) will hold 78.43% of the fully diluted post-issue paid-up equity share capital of
company, post the transfer to IOC, HPCL & BPCL and after the issue.

For the year ended March 31, 2009, the company reported net profit of 2,230.85 crore on total income of Rs 8,137.88 crore and for the quarter ended June 30, 2009, it posted net profit of Rs 739.69 crore on total income of Rs 2,138.15 crore.

CRISIL has been assigned a grade of 4/5 to the issue. Equity shares offered through this issue are proposed to be listed on BSE and NSE.

JM Financial Consultants Private Limited, Morgan Stanley India Company Private Limited, Citigroup Global Markets India Private Limited and HSBC Securities & Capital Markets (India) Private Limited are the book running lead managers to the issue. Karvy Computershare Private Limited is the registrar.

OIL is the second largest oil and gas company in India as measured by total proved plus probable oil and natural gas reserves and production (Source: DGH).

Moneycontrol.com conducted a poll among market experts to find out if you should subscribe to the issue or not. While most experts say ‘subscribe’, SP Tulsian and Sajeev Dhawan say ‘avoid’. Moreover, those who advice to subscribe believe that this will be a long-term bet.
View
Manish Bhatt of Prabhudas Lilladher advises people to subscribe to the issue for listing gains as well as with long term perspective. OIL is currently available at a discount to ONGC’s current market price. He sees Rs 1,200 a share on listing day though the primary market maybe affected a bit after Adani Power and NHPC slipping below their issue price.

Deven Choksey of KR Choksey Securities says that Oil India probably is quite interestingly placed. “We will probably get a good response on Oil India and the company looks reasonably well set given the kind of oil wells that they have and the kind of production activity that they’re carrying out and are likely to carry out in coming quarters.”

“Importantly after this IPO they would have about Rs 9,000 crore worth of cash in the books. Interestingly one will have to watch as to how they will deploy this cash in further production activities. So from that perspective the company looks reasonably good from an investment point of view.”

Sonam Udasi, VP-Research at Brics Securities said it should get subscribed. “There are not many exploration companies in India. So, I think it should see a lot of investor interest. It should get subscribed on the first day itself.”

Counterview
Investment Advisor, SP Tulsian advises to buy ONGC instead of Oil India. He says, “Though we are not convinced even at the lower band of Rs 950 per share, but those who are keen to go for it, should contemplate applying at the lower band. It is infact worth and advisable to buy ONGC from the secondary market, instead of going in for this IPO. To justify the pricing of this IPO, share price of ONGC has to move up from its present level of Rs 1,185. So why not bank on the leader and giant instead of this tiny and regional player.”

Sajiv Dhawan of JV Capital Services says, “One should buy the stock if one is very patient but for the average investor, it was probably an avoided.”

No related posts.