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Indian Oil IPO to raise about Rs 19,000 crore  

Indian Oil Corp may hit Street in Jan with Rs 19,000-crore offer

NEW DELHI: State-run Indian Oil Corp (IOC) will start short listing merchant bankers next week for its public issue that is likely to raise about Rs 19,000 crore, making it the largest-ever equity offer in the country, three government officials and a company executive said. Half the proceeds would go to the government, which will offload 10% of IOC shares to help it meet its disinvestment target of Rs 40,000 crore this fiscal. In addition, the company will issue new shares amounting to another 10% of its equity capital to help the country’s largest state refiner build new units. The Rs 19,000-crore public offer, which would top Coal India’s Rs 15,000-crore offering, may hit the market by January, adding to the rush of equity and debt issues aggregating to an estimated Rs 80,000 crore in the next six months. Coal India managed to sell about a third of its shares offered in the IPO on Monday, the first day of the issue. “The Cabinet note is under circulation. After views of relevant departments are incorporated, the Cabinet’s approval will be sought,” an oil ministry official said, requesting anonymity.

Confirming the development, a senior IOC executive said the company was in the process of appointing a merchant banker. “If things move as per the present plan, the company may enter the market in January 2011,” a government official directly involved in the stake sale said. “The company has planned to issue expressions of interest for the appointment of merchant bankers sometime this week,” he said. As per the official, IOC is already working on the draft red herring prospectus internally and once the bankers are appointed, they will finalize the prospectus and file it with market regulator Sebi. “Subsequently, the company will enter the market shortly as it qualifies under the fast-track norms,” he said, referring to Sebi’s rules that allow some companies to enter the market immediately after filing the prospectus. There are chances that the IOC issue will enter the market even before the Rs 8,000-crore issue of SAIL, scheduled for January, the official said. The government will give priority to the IOC issue, as it would fetch the exchequer over Rs 9,000 crore while in case of SAIL, the government’s share would be Rs 4,000 crore, he added. Of the disinvestment target of Rs 40,000 crore in the current fiscal, the government has already raised Rs 2,090 crore by selling stakes in Satluj Jal Vidyut Nigam and Engineers India .

After issues of Coal India and Power Grid, the government would have mopped up about Rs 22,000 crore. After IOC, Hindustan Copper and Manganese Ore, the total proceeds will cross Rs 35,000 crore. And with the SAIL issue, the government will achieve its disinvestment target. At the last closing price of Rs 405.50 per share on Monday, the market capitalization of IOC is Rs 98,453 crore. At this price, the offer size will be Rs 19,690 crore. “Since the issue is a follow-on public offer (FPO), it may be priced at a marginal discount of 5-10%, resulting in an offer size of Rs 17,700-18,700 crore,” said another official involved in the sale of government stakes. Following the issue, the government’s stake will come down to 62.65% from 78.92% at present.

Of the current float size of 21.08%, ONGC owns 8.77% and another 2.42% is owned by the two trusts created after the merger of BRPL and IBP. In order to issue 24.27-crore fresh shares, the IOC board has already approved the increase in authorized capital to Rs 6,000 crore—comprising 600-crore equity shares of Rs 10 each—from the current authorized capital of Rs 2,500 crore. After the issue, the paid-up capital of the company will increase to Rs 2,670 crore from the current level of Rs 2,427.90 crore.

By….Arun Kumar & Rajeev Jayaswal / The Economic Times..newspaper

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