Oil India IPO

by Manshu on September 1, 2009

in IPO/NFO

Oil India IPO: Open and Close Date

The IPO opens on September 7th and closes on September 11th.

Price band of the IPO

The price band of Oil India has been fixed between Rs. 950 and Rs. 1,050.

IPO Grade

CRISIL has graded Oil India 4 out 5, which indicates above average fundamentals.

Business of Oil India

Oil India is the country’s second largest state run explorer and produces 3.5 million tons oil annually. It is engaged in exploration, development, production and transportation of crude oil and natural gas onshore in India. Oil India has also been accorded the status of Mini Ratna by the Government of India. Just to keep things in perspective though, ONGC, which is also controlled by the government is ten times the size of Oil India.

The IPO is being planned out to issue new shares to the public, but at the same time the government will also sell 10% its own stake to IOC, HPCL, BPCL and IOC.

So, what this means is that the fresh equity sale will give the company some cash infusion and then the government stake sale will pocket the government some money and help them meet their disinvestment target.

Some of you will remember that this IPO was initially planned somewhere around November last year, but you all know what happened to the market at that time. The roaring success that NHPC has seen must have encouraged the government to come out with the IPO at this time.

Oil India has most of its business concentrated domestically, but it is exploring oil and natural gas in Gabon, Libya, Nigeria and Yemen too.

Its EPS for 2009 was Rs.101, and based on that the P/E multiple at the lower and higher range comes out between 9.4 and 10.4. ONGC had a diluted EPS of Rs.75.19 last year, and at the current price of Rs.1185, it trades at a P/E of 15 times.

Risks Facing Oil India

The government sells petrol and kerosene at a discount to international prices to retail consumers. The subsidy is then shared by the government and oil companies. When oil prices sky-rocket, the burden of this subsidy becomes really high on oil companies. Oil India also shares this burden, and its profits can be adversely affected if oil prices skyrocket.

Volatility of oil prices and very low crude prices are also bad for the company. This may sound counter intuitive, given the risk mentioned above, but the company gets adversely impacted if the crude prices plummet.

Oil India has all of its oil reserves in the Upper Assam basin, which is a maturing resource, and so it is facing decreasing production rates. This means that the need for developing new resources is relatively higher for Oil India, than other companies.

The company faces stiff competition in oil exploration by companies like ONGC, IOCL, GSPCL, GAIL, British Energy, RIL, Cairn Energy and Niko Resources.

The company is involved in several criminal proceedings and one environment related Public Interest Litigation (PIL), which if decided against it can negatively impact it.

These were some key aspects related to the Oil India IPO that you should keep in mind while deciding whether you want to invest in the IPO or not. This is not a buy or sell recommendation, and is just a summary of its business.

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{ 5 comments… read them below or add one }

MARKANDA SAMANTA September 3, 2009 at 10:48 PM

THE OIL INDIA IPO IS HIGHLY PRICED.

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mukesh September 4, 2009 at 12:05 AM

is this ipo is mutual fund then what are the load applicable, if not then this share has the charges for investment i req that info if iam taking thru ur branches & agents/broker. i req ur branches in navi mumbai & thane area. plz do the needfull asap.

Reply

rajesh m m September 6, 2009 at 1:18 AM

oil india seems to be fairly priced as compared to ONGC ,NHPC. one can remember that the inv. in gail has multiplied to 4 times in the last 6 yrs.

Reply

Narayan Rao September 17, 2009 at 5:12 AM

When will be Oil India Shares allotted?

Reply

Amit Dubey October 6, 2009 at 12:55 AM

I had applied 12 IPOs for Oil India , but I got only 8 IPOs. Rest amount for 4 IPOs ,I did not get it back to my account.
What Should I do ?

Amit dubey
+91 9862199902 , +91 9436733707

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