85% Of Ioc Divestment Offer To Be Placed Abroad

This implies that of about 11.3 crore equity shares of Indian Oil (five per cent of the government's holding) to be disinvested, 85 per cent would be placed in international markets or with foreign institutional investors.

The international route has been chosen since the price earnings (PE) ratios for the petroleum sector, as reported in international financial journals, in these markets are more favourable -- close to 16. In the domestic markets, the PE ratios for the sector are placed at 8.4.

The government hopes to get twice the price for Indian Oil shares in the international market than in the domestic market because of the PE ratio differential.

The Indian Oil share, which is being quoted at Rs 710 on the Bombay Stock Exchange, has not been traded regularly. At the same time, whenever trades have taken place, it tends to run into tens of thousands of shares. The two taken together suggest that trading has been mostly inter-institutional and that most investors have preferred to hold on to the shares.

International PE ratios for the petroleum sector have become favourable in view of the winter season, when demand for petroleum products peak.