India raises $585 million from Oil India share sale

MUMBAI Fri Feb 1, 2013 8:38pm IST

A worker examines the valve of a pump on a well in Ahmedabad March 1, 2012. REUTERS/Amit Dave/Files

A worker examines the valve of a pump on a well in Ahmedabad March 1, 2012.

Credit: Reuters/Amit Dave/Files

Related Topics

Stocks

   

MUMBAI (Reuters) - India raised $585 million through a share sale in state explorer Oil India(OILI.NS) on Friday, an encouraging sign for the government's efforts to divest stakes in other state firms to bridge its fiscal deficit.

The government had offered 60.11 million shares, or 10 percent of the company's stock and had set a floor price of 510 rupees per share for bids. Before the offer, it held about 78 percent of the company.

By Friday's close, the Oil India offer had attracted bids for 154.14 million shares at an indicative weighted average price of 517.99 rupees, exchange data showed.

The bids for two-and-half times the shares on offer indicated rising investor interest in the oil and gas sector after the government partially freed diesel prices last month and ahead of an impending increase in natural gas prices, both aimed to bring down its fuel subsidy bill.

The subsidy burden on India's state oil producers and retailers has long been a worry for investors. Last year, a $2.6 billion stock auction in state explorer Oil and Natural Gas Corp (ONGC.NS) required large bids from state investors to be fully covered.

The Oil India offer follows a $1.1 billion share auction in state miner NMDC (NMDC.NS) in December.

Selling shares in state companies is a key element of the government's plan to bring down its fiscal deficit to 5.3 percent of gross domestic product by March-end to avoid a credit downgrade from global ratings agencies.

New Delhi aims to raise a total of $5.5 billion in the current fiscal year ending March through stake sales, a target many analysts and economists feel is optimistic.

Upcoming share sales in the current fiscal year include top power utility NTPC Ltd (NTPC.NS), state trading firm MMTC Ltd (MMTC.NS) and steelmaker Steel Authority of India Ltd (SAIL.NS).

Foreign institutional investors accounted for about 40 to 50 percent of the total Oil India bids, two sources with direct knowledge said. Final data on bids is expected later.

Analysts expected the offer to generate robust demand, given Oil India's attractive valuation compared to larger rival ONGC, and strong growth prospects for the company. Only two of the 40 analysts covering Oil India have a 'sell' recommendation on the stock, according to Thomson Reuters Starmine data.

Oil India, which accounts for 10 percent of the country's domestic crude output and about 5-6 percent of its natural gas, holds assets in India's northeast. It has also been aggressively scouting for overseas assets.

Shares in the company closed 2.7 percent lower at 525.50 rupees, but still at a premium to the indicative offer price. The stock has jumped 13 percent so far in 2013, compared with a 2 percent gain in the BSE Sensex.

(Additional reporting by Sumeet Chatterjee; editing by Keiron Henderson)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Markets

REUTERS SHOWCASE

Segway in India

Segway in India

Segway’s India business pegs hope on tech-savvy Modi  Full Article 

Power Outage

Power Outage

Mumbai hit by power cuts  Full Article 

Commodities

Commodities

Gold imports, premiums to jump on festive demand - top refiner  Full Article 

Economic Worries

Economic Worries

Pakistan's promises to IMF in doubt as protests sap economy   Full Article 

Islamic Finance

Islamic Finance

Basel III deposit challenge looms over Islamic banks   Full Article 

Antitrust Probes

Antitrust Probes

U.S. business lobby says concerned China antitrust probes unfair.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage