Oil India to consult govt before public issue

Oil India (OIL), the second-largest government-owned oil producer, will consult the finance ministry before taking a decision on its proposed initial public offer (IPO) of shares.

The decision to consult the disinvestment division comes at a time when equity markets around the world are being hit by collapse of investment banks in the US.

This has forced foreign institutional investors to pull out money from the Indian markets leading to 6.35 per cent, or Rs 294,225 crore, of wealth being wiped out from the markets in the last three days.

“We are ready with the public offer. But we will go back to the government and discuss with them, as also with our merchant bankers,” said a senior official in the company who did not want to be named.

The company was initially planning to open its public offer on November 10 and list its shares on the stock exchanges by November 29, the official said. The company got clearance from market regulator Securities and Exchange Board of India (Sebi) for the IPO on September 11. This approval holds for 90 days. If OIL does not open its issue before December 10, the company will have to reapply for the market regulator’s approval.

The company plans to offer 10 per cent of its expanded capital base to the public. Another one per cent will be offered to employees. The central government, which currently holds around 98 per cent stake in the company, will also offload 10 per cent of its stake in the company to state-owned refiners, Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation at the issue price.

The weak market conditions may, however, prove to be a deterrent for the company.

“There’s a lot of chaos in the global financial markets. And is in no way insulated from this turmoil,” said a Mumbai-based analyst. “It will be difficult for Oil India in this market situation.”

Company officials, however, remain cautiously optimistic. “The market may not remain same for a long time. It has almost bottomed out. We can still hoping that we can go ahead with the public offer,” said the company official.

The company’s IPO was held up as the company did not comply with the norm of having 50 per cent of its board made up of independent directors under Clause 49 of the Listing Agreement with the stock exchanges.

It has since filed a revised prospectus after the requisite number of independent directors.