Merchant bankers invited to lead manage Oil India IPO

Vol 11, PW 8 (23 Aug 07) People & Policy

Oil India has begun the groundwork to launch its eagerly awaited Initial Public Offering (IPO) to divest up to 10% of the company to the public on one of the country’s stock exchanges, most likely in Mumbai.

PETROWATCH learns Oil India invited several merchant bankers to apply for appointment as lead managers to the issue on August 14th, including SBI Capital Markets, DSP Merrill Lynch, JM Morgan Stanley, Kotak Securities and HSBC. Unusually, Oil India wants to hire three lead managers for the issue and expects a reply by next week.

“This will be a big issue,â€‌ Oil India tells us. “At least three bankers will be needed to manage it.

There is a lot of work to be done. Setting up and managing a dataroom for due diligence is important.

â€‌ Oil India believes India’s federal cabinet will give the green signal for the IPO any day, following months of speculation. “For the past four months this issue has been with the cabinet,â€‌ adds Oil India.

“We thought it is better to be proactive and start the groundwork for the IPO to save time.â€‌ Oil India expects to complete the IPO in six months from the date of cabinet approval.

Cash rich, the company is sitting on Rs5000cr ($1bn) surplus and hopes to raise another Rs1500cr ($340m) from its 10% sale to the public. “Another 10%,â€‌ adds our company source, “is likely to be offered and divided up between Indian Oil (5%), Bharat and Hindustan Petroleum (2.5% each).

â€‌ Oil India tells us that over the next five years it plans to spend around Rs10,000cr ($2.5bn) across its activities. But if the IPO is aborted, raising funds won’t be a problem.

“Oil India is a debt free company with a strong balance sheet,â€‌ we hear. “We could raise Rs30,000cr ($7.5bn) if we need to just on the strength of our balance sheet.