Oil IPO subscribed 30.6 times on final day

The initial public offer of Oil India Ltd got subscribed over 30.6 times on the final day of closing on Thursday with institutional buyers flocking the counter with maximum number of bids.

The oil explorer's IPO received bids for 80.93 crore (809.3 million) shares against 2.64 crore (26.4 million) on offer as on 1600 hrs. Investment banking sources said that the portion reserved for qualified institutional buyers got subscribed 54 times, while the non-institutional and retail investors bid 9.77 times and 1.14 times respectively.

OIL, a 'Mini Ratna' PSU, expects to raise up to Rs 4,982 crore (49.82 billion) through the stake sale. The company would be listed on the bourses on September 29.

This is the second PSU stake sale after NHPC during the second term of the United Progressive Alliance government.

Marketmen said despite huge subscription of the issue, lack of interest from retail investors is a cause of concern for the primary market.

"Retail investors are keeping away following disappointing listing of NHPC and Adani Power, while high networth individuals, which have burnt their fingers in the previous issues being unable to meet the IPO financing, are also not showing much interest," SMC Capitals equity head Jagnnadham Thunuguntla said.

"This signals that the confidence in the primary market is yet to bloom fully," Thunuguntla added. Under the twin offer for disinvestment in OIL, which produces 3.5 million tonnes of oil annually, the company will offer fresh equity of 2.64 crore (26.4 million) shares or 11 per cent, while the government will put on offer 10 per cent of its stake in the company to state refiners.

Post-IPO and disinvestment, the government's stake in the company will decrease to 78.50 per cent from the present 98.13 per cent.

The government will sell 10 per cent of its current holding in OIL to the state-run refiners Indian Oil Corp, Hindustan Petroleum and Bharat Petroleum. IOC will get about five per cent, while HPCL and BPCL would take about 2.5 per cent stake each in the firm.

JM Financial Consultants, Morgan Stanley Company India Pvt Ltd, Citigroup Global Markets India Pvt Ltd and HSBC Securities and Capital Markets (India) Pvt Ltd are the lead book runner of the issue.

Rating agency Crisil has assigned a grade of four (out of five), indicating above average fundamentals, to the issue.

Graphic: Dominic Xavier