Oil India $570 m IPO oversubscribed on first day

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Oil India $570 m IPO oversubscribed on first day

This article was posted on Sep 8, 2009 and is filed under Press Releases

State explorer Oil India’s $570 million IPO was subscribed nearly 1.3 times on Monday, signalling investor appetite had not waned in the wake of a muted stock market debut for two recent big Indian listings.

‘Oil India IPO subscribed in 30 minutes’

Solid demand for Oil India, whose IPO follows recent offerings from state hydropower producer NHPC and private utility Adani Power, means the government may look to push more stake sales in state firms to fund spending and cut the country’s yawning fiscal deficit.
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The deal was fully covered within 30 minutes of opening, three banking sources said, and by close at 5 p.m. (1130 GMT) on the first day, the 26.4 million share offering was subscribed 1.28 times, according to the National Stock Exchange’s website.

Most of the bids were at the top end of the 950-1,050 rupees price band, one banker said.

Oil India – IPO: Invest at cut-off

Analysts say strong fundamentals and bright long-term growth prospects will draw investors to Oil India.

The company has made discoveries more consistently than larger state-run rival Oil and Natural Gas Corp in the past few years, while its overseas portfolio is promising, Angel Broking analyst Deepak Pareek said.

“Management has also hinted at a potential stake buy via an overseas acquisition of around $1.5 billion,” he said.

“We believe that acquisition of a producing property will improve the company’s production profile as well as reserves.”

NHPC and Adani Power that had together raised $1.9 billion in IPOs, which were subscribed more than 20 times, had made a tepid stock market debut, raising concerns this may douse appetite for new offerings.

However, government share offerings in India have historically been priced to sell and delivered better market returns than private-sector listings in recent years.

Other state firms looking at share sales include top power generator NTPC Ltd, Shipping Corp of India and Rural Electrification Corp.

New Delhi is coping with a 16-year high fiscal deficit and has announced a record $90 billion borrowing plan. A sell-down in stakes in state firms is expected to be seen by debt investors as a sign of fiscal responsibility and commitment to reform.

Indian companies have raised about $8.5 billion through share sales so far this year, surpassing the total for all of 2008, powered by a sharp rally in the stock market that has been fueled by an influx of foreign funds.

The benchmark stock index has near doubled from a 2009 low in early March, driven by more than $8 billion in net foreign fund flows. The index rallied 2.1 percent to a 15-month closing high on Monday.

“(Oil India’s) higher cash levels will lend strong support to the company’s valuations in the event of any weakness in the markets,” Angel’s Pareek said.

Oil India, which is primarily into exploration, development, production and transportation of crude oil and natural gas onshore in India, is also exploring crude oil and natural gas in Egypt, Gabon, Iran, Libya, Nigeria, Timor Leste and Yemen.

The company, which also produces liquefied petroleum gas, had estimated proved and probable crude oil reserves of about 575.4 million barrels as of March 31, 2009.

JM Financial, Morgan Stanley India, Citigroup Global Markets India and HSBC Securities and Capital Markets are the lead managers to the Oil India issue.

(For more news on Reuters Money click http://in.reuters.com/money)

source: Sify

Tags: listing date of Oil India IPO, listing price of Oil india IPO, oil india IPO