Mumbai: Oil India gained as much as 10% on its trading debut after the state explorer’s heavily subscribed $570 million IPO, boosting government plans for selling stakes in other companies.
Analysts had expected Oil India’s shares to rise 5-7%, and the better-than-expected listing will allay fears of waning investor appetite following tepid recent market debuts for state-run hydropower producer NHPC Ltd and private utility Adani Power that had together raised $1.9 billion.
Oil India’s initial public offering was subscribed more than 30 times, the third major Indian IPO this year and second by a state firm, as IPOs revived following an 18-month lull after share markets plunged in 2008.
“I think the debut has been fantastic. This will give a huge boost to the IPO market,” said Alex Mathews, head of research at Geojit BNP-Paribas Financial Services.
“We had expected there might be some profit booking at the level of Rs1,100 to Rs1,120, but the stock has easily managed to rise past those levels,” he said.
Shares in the oil and gas explorer ended up 8.6% at Rs1,140.55, compared with the IPO price of Rs1,050, after rising as much as 10.1% during trade. India’s benchmark BSE index rose 1.6%.
Analysts had worried NHPC’s muted debut would derail government plans to sell stakes in other companies as it tries to lift itself out of a yawning fiscal deficit and raise money to fund expansion in Asia’s third-largest economy.
India plans to sell stakes in at least five state firms by the end of the financial year in March 2010, a government official said after Oil India made its stock market debut.
“Sentiment had been shattered by the weak NHPC listing, but now with Oil India’s performance, investors will be more confident,” Geojit’s Mathews said.
NHPC rose 1.9% on listing day and is now trading at Rs34.55, below its IPO price of Rs36.
Circling Foreign Assets
Oil India expects capital expenditure of Rs4500 crore ($935 million) over two years, with 60% going towards exploration and production, Chairman N M Borah said.
The company has $1.5 billion of cash, which it plans to use for buying producing assets overseas or taking over a foreign firm that owns producing properties.
“With regard to crude oil, we are looking at assets that have 10,000 to 20,000 barrels per day of capacity,” Borah said.
The company, which mainly operates in India, is exploring crude oil and natural gas in Egypt, Gabon, Iran, Libya, Nigeria, Timor Leste and Yemen.
Oil India is now looking to buy properties in regions including South East Asia, Russia and Australia, Borah said.
Oil India had estimated, proved and probable crude oil reserves of about 575.4 million barrels as of 31 March 2009.
JM Financial, Morgan Stanley India, Citigroup Global Markets India and HSBC Securities and Capital Markets managed the IPO.
Indian firms have raised $15 billion in share sales so far this year, surpassing 2008 volumes, helped by a 75% rally in the BSE index this year.