Friday, September 11, 2009

Oil India $570 million IPO oversubscribed 31 times

State-owned explorer Oil India's $570 million IPO was subscribed nearly 31 times on Thursday (September 10), quelling fears investor appetite for new offerings had waned in the wake of a tepid market debut for two recent big listings. Robust demand for Oil India's IPO also boosted hopes the government will look to sell more stakes in state firms as it looks to raise funds and cut a widening budget deficit. The 26.4 million share offering, priced at a discount to peers, was subscribed 30.81 times by 6:00 p.m. (1230 GMT) on the final day, according to the National Stock Exchange's website.

The portion of the IPO allotted to institutions was oversubscribed more than 50 times, with most bids coming at the higher end of the range of 950 to 1,050 rupees, a banker involved in the deal said. Oil India's IPO follows recent offerings from state hydropower producer NHPC and private utility Adani Power, which had together raised $1.9 billion.

Analysts say Oil India's strong fundamentals, bright long-term growth prospects and better record for discoveries over larger state-run rival Oil and Natural Gas Corp will draw investors to the company. "The valuations for Oil India are much cheaper than peers, and its exploration pipeline also looks better than ONGC," Sonam Udasi, vice president at BRICS Securities, said. "Even if the overall market is weak, we could see a strong listing. We think the shares could see a premium of 20 to 25 per cent on the listing day."

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's market value after the offering would be $4.8 to $5.3 billion based on the indicative price band, according to Macquarie analyst Jal Irani. JM Financial, Morgan Stanley India, Citigroup Global Markets India and HSBC Securities and Capital Markets are the lead managers to the Oil India issue. The IPO had been fully covered within 30 minutes of opening on Monday, three banking sources had told Reuters.

Source: Reuters / The Economic Times

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