Modest response to Cairn IPO; subscribed 1.14 times

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Cairn India, a crude oil and natural gas exploration and production company, closed for subscription.

Although the issue has been subscribed fully but the subscription has been below analyst expectations. The subscription has been lesser as compared to other recent issues like Tanla Solutions, Ess Dee Aluminium, XL Telecom, LT Overseas etc. They had received subscription over 38 times, 32 times, 8 times and 7 times, respectively

Whereas, Cairn India oversubscribed 1.14 times, as per the NSE website.

Total bids received by the issue were more than 37.41 crore against its issue size of 32.87 crore equity shares. More than 8.24 crore bids received at cut off price.

More participation seen only from qualified institutional investors but that also very less wheras non-institutional and retail investors' portion not even fully subscribed.

Subscription Details

Investors	Times
Qualified institutional buyers	1.36
Non institutional investors	0.47
Retail individual investors	0.91
Total	1.14

 

 

 

The company entered capital market with a public issue of 32,87,99,675 equity shares of Rs 10 for cash at a premium to be decided through a 100% book-building process.

Gross proceeds from the IPO would help Cairn India raise a minimum of Rs 86.16 billion at the lower end of the price band and a maximum of Rs 99.47 billion at the upper end of the band.

Cairn India is a newly incorporated Indian company and has been promoted by Cairn Energy PLC, a crude oil and natural gas exploration and production company trading on the main market of the London Stock Exchange. The newly incorporated company, Cairn India, will acquire the subsidiaries which hold all of the ownership and operated interests in Cairn Energy PLC's Indian crude oil and natural gas development and production assets and the majority of its Indian crude oil and natural gas exploration assets.

Cairn India has been exploring and operating development and production assets in India for over 12 years in partnership with the Government of India, state governments, regulators and key industry participants such as ONGC.

Cairn India's unique position in India and the importance of its development in Rajasthan to the Government of India and relevant state governments of India is reflected by the estimation that Cairn India will operate approximately 20% of India's oil production by 2010, assuming Indian production remains at current levels and production from the Rajasthan Block's Northern Fields fulfils its target production rate of approximately 150,000 bopd.

From the funds raised through the issue, Cairn India plans to pay Cairn Energy PLC for acquiring shares of Cairn India Holdings; fund development in the Rajasthan Block as also additional drilling in Ravva and Cambay fields plus finance new exploration and appraisal activities from additional exploration contracts that may be awarded in NELP Round VI.

DSP Merrill Lynch and ABN Amro Securities India are acting as global coordinators and book running lead managers to the issue along with book running lead manager JM Morgan Stanley.