Brokerages are unanimous: Say subscribe to Oil India IPO

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Oil India, the second largest oil and gas company in India, will come out with an initial public offering (IPO) of 26,449,982 equity shares of face value Rs 10 each. Its issue price has been fixed at Rs 950-1050 per equity share and it will raise around Rs 2,512.75-2,777.25 crore.  

The issue comprises a net issue to the public of 24,045,438 equity shares and a reservation of 2,404,544 equity shares for subscription by eligible employees, at the issue price. The issue shall constitute 11% of the fully diluted post-issue capital of the company.

Research and broking firms have recommended investors to subscribe to the issue.

HDFC Securities said, "OIL is offering shares at a valuation that translates into a EV/2P reserves of $4.1 (at the higher price band) compared to $5.4 for ONGC, $12.8 for Cairn and $7-8 for most international players. Higher production of Oil and Gas going forward, growing accretion to acreage, lower subsidy burden due to soft crude oil prices, high success ratio and operational efficiency, greater use of better technology, upsides from pipeline and downstream business, upside from likely revision in gas APM prices, better financial and return ratios - all this could mean that the difference in valuation attracted by ONGC and Oil could narrow going forward despite a difference in their sizes. The only major risk is of continued softness/fall in crude oil/gas prices. Investors can invest in the issue from a medium term perspective."

Next page: See what Sharekhan, Nirmal Bang Research, SKP Securities and SPA Securities are saying

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