Oil India IPO coming soon

The government has approved Oil India Ltd’s (OIL) proposal for 10% fresh equity issue through an initial public offer (IPO) along with disinvestment of 10% equity in favour of public sector oil marketing companies.

OIL is expected to raise around Rs 1,425 crore through the IPO at a price of Rs 600 per share. The move will enable the company to get listed on the stock exchanges.

The public sector company will also offer 1% stake to its employees, finance minister P Chidambaram said after the Cabinet Committee of Economic Affairs (CCEA) meeting.

The divestment of 10% of OIL’s paid up capital in favour of IOC, HPCL and BPCL would be done in the ratio of 2:1:1 respectively.

“The divestment in favour of three OMCs would not only strengthen their existing synergy but would also help them to raise resources by disposing these shares in the open market at an opportune time to tide over their under-recoveries,” a statement said.

The fresh issue of 10% of its paid up capital would meet Sebi’s requirement of listing of the company’s share on the stock exchanges. This would not only make OIL more amenable to market discipline but would also boost the company’s image. Besides, it would help OIL to raise resources for its future expansion and growth. The additional 1% allocation for its employees would motivate them towards better performance, it added.

The proceeds of divestment of the government holding in favour of IOC, HPCL and BPCL would accrue to the government. It will be used for meeting the needs of social sector programmes as, “also for the capital investments needs of revivable CPSEs,” it added.

OIL is 98.13% owned by the government and the remainder by employees. The proposed IPO of the company is aimed at financing the expansion and investment projects totalling about $ 3.5 billion over the next five years. The investments are proposed on expanding the exploration activities, including acquisitions overseas along with IOCL.