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OIL IPO Eyes Premium Pricing

The second PSU on the block may get priced at over Rs 1,000

After the rather strong response to the initial public offering (IPO) of National Hydroelectric Power Corporation (NHPC) recently, the government is all pepped up to put its best foot forward and get a similar response for yet another public sector undertaking (PSU) in the form of Oil India Limited (OIL).

Being the second state-run firm to hit the market, there is a buzz already about the rate at which the IPO will be priced. If everything goes well and the IPO is opened as per its scheduled date on September 7, sources say it may well be priced at Rs 1,000-1,100 per share.

The OIL pricing for its IPO is close to the prevailing share price of Oil and Natural Gas Corporation (ONGC). The former believes that its earnings per share (EPS) and book value are better than ONGC and this might finally lead it to pricing the issue in the range Rs 1,000-1,100. However, the final decision-making authority is a group of ministers who will be meeting latter this month on the issue.

The OIL IPO will open on September 7 and close on September 11. It will be listed on the bourses on September 29.

While 2.64 crore equity shares, or eleven per cent, will be offered to the public through the IPO by OIL, the government will sell 10 per cent stake in the company to the state refiners. The government stake will decrease from 98.13 per cent to 78.5 per cent post-IPO and disinvestment.

The IPO proceeds would be used to fund the CAPEX requirement of Rs 2,300 crore for 2009-10 and Rs 2,400 crore for 2010-11.

Alongside the OIL IPO, the government also intends to sell 10 per cent of its current holding in OIL to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. IOC will get about 5 per cent while HPCL and BPCL would take about 2.5 per cent each. The public holding will be about 12 per cent. OIL produces 3.5 million tonnes of oil annually.

OIL was to launch its IPO in November last year, but the downhill trend of the stock markets led to the delay.