Oil India

By Research Desk
about 10 years ago
Oil India

Oil India is entering the Capital market on 7th September 09 with a public issue of 2.65 crore equity shares of Rs. 10 each, in the band of Rs. 950 to Rs.1,050 per share.

                                                                        

The company can very well be compared with ONGC, as, it is about 10% of ONGC, in terms of level of operations and activity, while, almost at par on financial parameters. Let us have a look to the financials of both the companies as at 31-03-09: -

 

                                                                                                Rupees / Crores

 

ONGC

Oil India

Sales

1,05,257

8,138

PAT

 19,795

2,162

EPS (Rs.)

      93

  101

Book Value (Rs.)

    428

  436

Equity

  2,139

  214

Net Worth

91,573

 9,331

Dividend (Rs.)

 32.00

30.50

Subsidy Share

28,225

 3,023

Debt Equity

Debt Free

Debt Free

                                                                                                                                                             

So, if someone is deciding to buy share of Oil India, infact, it is mini ONGC being bought. Post IPO, equity will rise to Rs. 240 crores, with Government of India stake falling at 78.50% against 74%in ONGC. So even on this count, it remains, almost at the same levels.

 

It is an accepted fact of the market, while valuing companies in the same sector, with same pedigree, smaller companies have atleast 15% discount to the bigger ones. Also, in the case of IPO, atleast 10% discount needs to be given, over the expected listing price, to prospective investors.

 

Since ONGC is now ruling at Rs. 1,185, a discount of 15% over this, gives a secondary market valuation of Rs. 1,000 per share. A further discount of 10% on this, justifies a price of Rs. 900 per share in IPO. Since the band of the share has been fixed at Rs. 950 to Rs. 1,050 per share, even accepting lower band of Rs. 950, based on these presumptions, would be difficult to accept.

 

NHPC, another PSU IPO, has also recently disappointed giving not much profit to retail investors and losses to HNIs. At that time also, we have said that the government has become greedy by having stiff pricing and the same trend looks to continue for this IPO as well. NHPC having issued shares at 36 is now ruling at 37. It may be worst for Oil India.

 

Really speaking, though we are not convinced even at the lower band of Rs. 950 per share, but those who are to keen to go for it, should contemplate applying at the lower band. It is infact worth and advisable to buy ONGC from the secondary market, instead of going in for this IPO. To justify the pricing of this IPO, share price of ONGC has to move up from its present level of Rs. 1,185. So why not bank on the leader and giant instead of this tiny and regional player.

 

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