Dani Securities has come out with its report on Oil India. According to the research firm, the urgency to raise funds as well as favorable market conditions have prompted the government to line up a series of share sales in the remaining two months of the cr fiscal, wherein it expects to raise at least Rs. 27000 cr.
The promoters (Government of India) of Oil India have issued a notice of offer for sale (OFS) of 6.01cr shares or 10% of its equity. Allocation will be on price priority basis at multiple clearing prices as per the relevant SEBI OFS circular.
Floor price has been fixed at RS 510/share, valuing the issue at Rs 3065 cr. Sales will be executed within the trading hours on 1st February.
The OIL public offer, the third disinvestment this fiscal, will help the government inch towards its Rs 30,000 crore revenue target from stake sales in profit making PSUs. The government has so far raised Rs 6,700 crore through disinvestment in the current fiscal.
After investors take up the offer, OIL's free float will increase to a meaningful 31.57% while the government stake will stand reduced to 68.43%.
The urgency to raise funds as well as favorable market conditions have prompted the government to line up a series of share sales in the remaining two months of the cr fiscal, wherein it expects to raise at least Rs. 27000 cr.
Oil India is a Navratna company that is into exploration, development and production of oil and gas. It is India's second-largest E&P company in terms of production and reserves. Approximately 95% of Oil India's production comes from its Upper Assam basin. The company holds several NELP blocks as an operator and some with joint ventures. Currently, Oil India has 2P reserves of 941mnboe, indicating a reserve life of 22 years.
The government had on January 17 allowed retailers to raise diesel prices by small quantum every month to cut the Rs 96,000 cr deficit on the fuel sale. Upstream firms, like OIL and ONGC , make up for about 40 % of the revenue that fuel retailers lose on selling diesel, domestic LPG and kerosene at government-controlled rates. A partial deregulation would mean OIL having to pitch in lesser subsidy and achieve better realization. This we believe will result in bridging the valuation gap between domestic and international oil companies.
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