OIL India IPO - Subscribe

Oil India Ltd. (OIL), the second largest oil and gas company in India, opened its initial public offering (IPO) of 26.45 lakh equity shares of face value Rs 10 each for subscription today. Its issue price has been fixed at Rs 950-1050 per equity share and it will raise around Rs 2,512 - Rs 2,777 crore.

One can subscribe to the issue for the listing gains of 10-15%. Also I would recommend to buy ONGC from secondary market as there are chances of appreciation. On the longer term, OIL is a very good stock to be in the portfolio.

OIL would trade at 3.6x EV/boe (Enterprise Value/Barrel of equivalent), a significant discount to ONGC which is trading at 5.2x EV/boe. Given OIL's superior production profile, similar exposure to Policy risks and better prospects of Reserve accretion, we could see the valuation catch up in line with the ONGC.

At the upper band of Rs 1050, OIL will be available at 10x its earnings and EV/EBITDA at 4.94x which is in line with ONGC.

OIL India is the second largest oil and gas company in India as measured by total proved plus probable oil and natural gas reserves and production. It is primarily engaged in the exploration, development, production and transportation of crude oil and natural gas onshore in India. It is also present internationally through the exploration of crude oil and natural gas in Gabon, Iran, Libya and Nigeria and was recently awarded exploration blocks in Yemen as part of a consortium. OIL primarily conducts its activities with respect to its domestic producing blocks and exploration activities in its nomination blocks independently. OIL conducts exploration activity, both in India and overseas, through joint venture arrangements and PSCs (production sharing contract) with other oil companies.

Company has 24 NELP Blocks out of which it is the operator in 12 Blocks and these include 4 blocks acquired under NELP-VII round bidding during the year. These blocks are located across the nation and your Company has initiated action to undertake all activities for timely completion of the Minimum Work Programme. Today, OIL has a total acreage of 1,60,959 Sq Km and most of these are in Category I basin.