Mumbai: Integrated oilfield services company John Energy Ltd, backed by India’s best known stock market investor Rakesh Jhunjhunwala, is in talks with investment banks for an initial public offering (IPO) that could see the company raise up to Rs300 crore, said three people aware of the development.
Established in 1987, Ahmedabad-based John Energy is a provider of a bouquet of oilfield services such as drilling, providing skilled manpower, and manufacture of drilling rigs for onshore oil and gas exploration and production (E&P).
“They (John Energy) have been discussing with several investment banks about going public for a couple of months now. They are yet to appoint bankers for the IPO process,” said one the three people cited above requesting anonymity as the talks are private.
John Energy is looking to raise Rs250-300 crore through the IPO, he added.
The IPO will also help provide exit route for Jhunjhunwala and private equity firm Sage Capital.
Jhunjhunwala had invested Rs50 crore in the company in 2007. Sage Capital invested Rs100 crore in 2010. The latter’s investment came just after the company dropped its plans to go public.
As of 31 March, Jhunjhunwala held a 19.06% stake in the company, while Sage Capital held 16.29% stake, according to data from the company’s filings with the registrar of companies (RoC).
“One of the reasons they are looking at an IPO is to provide an exit to these investors. Both the investors will look to part-exit their stakes through the IPO. The firm also plans to raise some primary capital to invest in growing its business,” said the second person cited above, requesting anonymity.
According to data from the RoC, in 2014-15, the company reported a revenue of Rs514.5 crore, compared to a revenue of Rs520.31 crore in the previous year. In 2014-15, John Energy reported profit of Rs28.1 crore, as against a profit of Rs58.1 crore in the previous year. The latest financial numbers were not available with RoC.
“We have yet not decided on an IPO. Our investors have also not decided to exit,” said Mahesh Vyas, chairman and MD at John Energy.
E-mails sent on Tuesday to Jhunjhunwala and Sage Capital remained unanswered.
According to the company’s website, it has drilled more than 467 wells, working in areas as diverse as deserts, national parks and the Himalayas. Apart from India, the company has completed projects in countries such as Kazakhstan, Algeria and Uganda. It is also focusing on entering the Gulf Cooperation Council market.
John Energy has a fleet of 30 drilling rigs and employs more than 1,400 people.
Over the years, few private equity firms have taken a bet on the Indian oil and gas sector. Private equity firm Samara Capital invested Rs28 crore in Asian Oilfield Services Ltd, a reservoir imaging company, in 2007. The fund later hiked its stake to over 56% in two tranches, pumping in another Rs40 crore.
In May, Financial Express reported that Samara Capital had sold its entire stake in Asian Oilfield Services to Oilmax Energy, a Mumbai-based energy exploration company, for close to Rs30 crore.
In 2011, Multiples Private Equity had picked up a significant minority stake in Sara Sae Pvt. Ltd, which manufactures hi-tech drilling equipment for land and jack-up drilling rigs.
Low oil prices globally are impacting capital investment from oil producers, thus impacting the oilfield services companies, said experts. So far this year, Brent crude has risen 26.42% to $47.15 a barrel, from $37.28 a barrel, according to data from Bloomberg.
“In low-price regimes, capex activities in the E&P sector slows down throughout the world, impacting the business of oilfield services companies,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India Llp. But he added that in markets such as India, E&P activities heavily depend upon local policy and regulatory measures.
“With the announcement of higher gas price for deep-water, ultra deep-water and high-pressure, high-temperature blocks, good amount of capex is expected to happen in the Krishna Godavari (KG) Basin. Also, the government is coming up with auctions for several discovered small fields. Once these auctions happen, these 60-65 fields will see capex activity. Nimble local players will be able to take advantage of this,” said Mishra.