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Our Bureau

Bangalore, Oct. 14 Public sector Oil India Ltd (OIL) is unfazed by the financial market turbulence and intends to proceed with its planned initial public offering (IPO) after receiving Government clearance.

Company sources said OIL’s draft red herring prospectus was cleared by the SEBI, on September 11. Accordingly the company has a 90-day deadline for going ahead with floating the issue. OIL would have to complete the issue by December 10 this year.

However, OIL was waiting for a Government decision on the IPO. The Government has a stake of 98.13 per cent in OIL’s paid-up equity of Rs 500 crore. OIL’s proposal involved making an issue of 2.65 crore of equity shares, early this year. The issue would bring down the Government stake to 78.43 per cent, sources said.

The company’s requirements are for meeting the capital requirements, estimated at about Rs 4,500 crore. The capital expenditure was mainly for developing fields in the Krishna Godavari Basin and for fields awarded to it under NELP (New Exploration Licensing Policy) 7.

The sources said turbulence in the capital markets would have little effect on the company’s plans for making the IPO. This was because at least 11 per cent of placement would be with the public sector oil companies, Indian Oil Corporation, Hindustan Petroleum Corporation Ltd and Bharat Petroleum Corporation Ltd.

Sources said the petroleum companies were already committed to investing in the equity of OIL. Besides, the sources added, OIL also hoped to rope in subscription from domestic institutional investors (DII) including banks, mutual funds and insurance companies.

The sources, however, added that the placement with the oil companies and with the DIIs was hinged on the Government clearance. “The pricing band can be decided only after the Government clearance,” they said.

The company had made a net profit of Rs 846 crore in the first quarter of the financial year a 90 per cent jump over the corresponding period of the last financial year.

However, sources said that Oil India Ltd had contingency plans ready in the event of delays in Government clearance for the IPO.

This was because Oil India Ltd is currently a zero-debt company. Accordingly, the balance sheet gave it sufficient flexibility raise debt for meeting part of its capital expenditure.

More Stories on : IPOs | Petroleum

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