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Friday, September 4, 2009

OIL India IPO - Ratings From Research & Broking Firms

Oil India IPO: Open and Close Date
The IPO opens on September 7th and closes on closes on September 11th.

Price band of the IPO
The price band of Oil India has been fixed between Rs. 950 and Rs. 1,050.

IPO Grade
CRISIL has graded Oil India 4 out 5, which indicates above average fundamentals.

Oil India is the country’s second largest state run explorer and produces 3.5 million tons oil annually. It is engaged in exploration, development, production and transportation of crude oil and natural gas onshore in India. Oil India has also been accorded the status of Mini Ratna by the Government of India. Just to keep things in perspective though, ONGC, which is also controlled by the government is ten times the size of Oil India.

The IPO is being planned out to issue new shares to the public, but at the same time the government will also sell 10% its own stake to IOC, HPCL, BPCL and IOC.

Various stock research and broking firms have recommended investors to subscribe to the oil india IPO issue.

HDFC Secirities research report says:
OIL is offering shares at a valuation that translates into a EV/2P reserves of $4.1 (at the higher price band) compared to $5.4 for ONGC, $12.8 for Cairn and $7-8 for most international players. Higher production of Oil and Gas going forward, growing accretion to acreage, lower subsidy burden due to soft crude oil prices, high success ratio and operational efficiency, greater use of better technology, upsides from pipeline and downstream business, upside from likely revision in gas APM prices, better financial and return ratios – all this could mean that the difference in valuation attracted by ONGC and Oil could narrow going forward despite a difference in their sizes. The only major risk is of continued softness/fall in crude oil/gas prices. Investors can invest in the issue from a medium term investment perspective.

SKP Securities research report:
In the last 25 years, the energy consumption of the world has increased by more than 70%, bulk of which is met from crude oil. The APAC region has become the largest energy consuming region with a CAGR of 4.8% during the same period. With an excellent track record in the exploration of onshore reserves, successful bidding in NELP rounds so far, strong cash flow, healthy liquidity position and low capital gearing ratio, OIL is on track to achieve its ambitious expansion plans. The issue price band of Rs 950-1050 implies a P/E of 10.57-11.68X on FY09 EPS of Rs 89.90 (on post issue equity). The research firm has recommended to Subscribe to the issue.

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