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Richa Mishra

New Delhi, Sept 17 The stock market volatility is unlikely to defer public sector undertaking Oil India Ltd’s (OIL) initial public offer (IPO) schedule of November. Sources said while the price band for the proposed IPO is expected to be in place by third week of October, the company’s IPO is likely to hit the market on November 10.

However, an eye is being kept on the market, industry sources told Business Line adding that “OIL has strong fundamentals and we don’t expect any change in IPO plans.”

OIL has already filed its draft prospectus with SEBI for an IPO of up to 2.64 crore equity shares to raise over Rs 1,500 crore. Besides, the company has also entered into an understanding with PSU oil marketing companies – Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation – for selling 10 per cent equity stake in the ratio of 2:1:1, respectively.

The OMCs will acquire the stake at a price equivalent to the issue price of the equity shares that are proposed to be offered by OIL to the public in accordance with the book building method.

OIL had got the Cabinet nod for fresh equity of 10 per cent of its paid-up capital through IPO along with a proposal of issuing additional one per cent of its paid-up capital to the employees of the company. Disinvestment of 10 per cent in favour of State-owned OMCs, coupled with an IPO is expected to reduce the effective Government stake in the company to about 78 per cent from the existing 98.13 per cent.

The IPO proceeds are expected to be used for exploration and development activities and diversification of existing business to downstream. However, it will not be used to fund existing or future participation, investment activities in Iran, Sudan, Myanmar or any other countries or persons that are subject to economic sanctions imposed by the US Government and administered by the US Export Administration Regulation and Office of Foreign Assets Control of the US Treasury Department.

This is mainly due to advice from the lead bankers JM Financial Consultants, Morgan Stanley India Company, Citigroup Global Markets and HSBC Securities and Capital Markets, sources said.

The company’s current annual crude oil production is 3.5 million tonne showing a growth of 13 per cent, and natural gas production is 6.80 mmscmd. The production amounted to approximately 10 per cent and seven per cent of India’s total production of crude oil and natural gas respectively.

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