Aban & CPCL gain as Iran-US reach agreement on nuclear programme

Aban's 35 % of revenue comes from rigs in Iran, while CPCL's 15 % of shareholding held by Iranian Oil Company

Stock prices of Chennai-based Aban Offshore and Chennai Petroleum Corporation, subsidiary of Indian Oil Corporation, have surged on Monday on the backdrop after Iran and the global power nations - the US, China, France, Russia, the UK and Germany unveiled a preliminary framework on Iran's nuclear programme. This may lead to suspension of sanctions over the country.

Stock prices of Aban Offshore gained over 7.92 per cent and closed at Rs 462.75 compared to the previous closing of Rs 428.80, on Monday evening at BSE. Earlier during the day, the prices reached Rs 474.

Around 35 per cent of the company's revenue comes from the five rigs deployed in Iran. The prospective suspension of the sanction would help the company to improve its working capital situation, considering that currently there is a delay of one to two months in payment receipts from Iran, according to brokerage and investment firm CLSA.

The insurance cost, which is around nine per cent of the operating expense would reduce, which would help the company to increase its profit, it said. The move is also expected to increase the demand of jack-up rigs globally, said CLSA.

Another company's stock price reacted to the news was CPCL. The stock price of the company rose by 4.36 per cent at Rs 71.85 as compared to previous close of Rs 68.85. The price went up to Rs 72.7 a share during the day.

For Indian Oil Corporation (IOC's) subsidiary CPCL, the presence of an Naftiran Intertrade's (Swiss subsidiary of National Iranian Oil Company) as one of its major shareholders has been a major issue in the wake of US sanctions against the West Asian country. The Iranian company has around 15.40 per cent stake in CPCL.

CPCL could not be merged with IOC and one of the major issues attributed by the company sources was the Iranian partner, who is not interested in exiting and CPCL could not raise capital from the parent due to the Iranian partner.

IOC alone can't infuse money; if CPCL issues rights shares, it will also increase the Iranian partner's stake. Direct capital infusion could not be possible, because of the US sanction on Iran. The framework, if finalised and implemented, would ease the situation and probably see suspension of the sanction, which would help these companies in seeing more growth, it is expected.