Govt plans pre-IPO placement for OIL

The government will offload 10 per cent of its shares in Oil India Ltd (OIL), the second-largest government-owned oil producer, to the three oil marketing companies "" Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp "" as a pre-IPO (Initial Public Offer) placement before OIL's share sale hits the market in October this year, but at a price determined in the public offer, a company official said.

The share sale to the oil marketing companies will have a lock-in period of one year, according to regulations laid down by market regulator Securities and Exchange Board of India (Sebi).

The initial public offer of OIL, along with that of hyrdo-power generator NHPC, is part of the government's plans to divest its stake in public sector companies to fund social programmes.

The two public offers, along with the divestments, were held up for over a year due to the lack of independent directors on their boards and opposition by the Left parties, which was supporting the government.

OIL will offer 10 per cent of its equity to the public through a fresh issue of shares and it hopes to garner around Rs 2,000 crore from the IPO. In addition, it plans to sell one per cent to its employees, a senior OIL official said.

This values the company at Rs 20,000 crore or over 11 times its 2007-08 net profit.

Similarly, NHPC plans to sell 10 per cent of its equity through fresh issue of shares and is hoping for a valuation of Rs 16,000 crore, nearly 16 times its 2007-08 net profit, said an NHPC official. The government also plans to divest 5 per cent of the expanded equity to garner another Rs 800 crore.

Money raised from selling shares to the public will go to the companies while the government will keep the money earned by selling part of its post-IPO shareholding.

The government had planned to divest part of its stake in public sector companies to raise funds for various social programmes.

Both OIL and NHPC now have the number of independent directors required under Clause 49 of the Listing Agreement with the stock exchanges. Clause 49 mandates that companies with executive chairmen must have half their boards constituted by independent directors.

"The appointment of the six independent directors has been finalised. We expect the letters this week," said an official with OIL. "We now go to Sebi and then to the market in October," he added.

OIL officials are, however, still wary of the volatile stock markets. "We expect the market to improve by October. We are open to modifying the timing if it doesn't," said an OIL official.

The official said the firm was also open to listing on the US exchanges, "though that will take some time", he said. "Oil and gas companies have raised around $20 billion from public offers around the world in the last six months. Oil and gas is very attractive," he added.

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