A lot of you have requested comments on the Oil India IPO. I’m a sucker for IPOs which give you a P/E or 10 or so, and it seems this one fits. So my first impression is positive. Here’s what happens as I go through the DHRP (prospectus).
There’s 2.4 cr. shares on offer, at 950 to 1050 per share. That gets them 2400 crores. As I write the issue is already 2.5x oversubscribed, though there’s not yet full subscription in the retail category. So getting allotment will be tough.
OIL is an oil company (surprise!) and it looks like a proxy for crude prices. It’s worse because it needs to subsidize the Public Sector OMCs against huge price rises – so it doesn’t make as much on the upside as it loses when crude goes down.
They’ll spend most of the money in exploration and maintenance. Which is good, but I don’t really have the time to go through the points in detail. There’s a huge dependence on the north-east, but that also reduces pipeline costs and such. They have an about 575 million barrels of crude estimated – to give you context, India uses about 3 million barrels a day, approximately.
Their EPS, in the last three years, was Rs. 71.98, 83.16 and 104.24 respectively. That’s a healthy growth and the upper band P/E is thus about 10.5. All else being equal, this is a competitor to ONGC, whose EPS is 92 and price is 1192 – a P/E of about 13.
Taken that way, it’s a go; but I won’t apply because I don’t have ASBA (Application Supported with Blocked Amount) set up yet. If I had ASBA, I’d take a chance and apply in the retail category (the ASBA ensures I don’t lose interest in the time that they take to process apps and list).
So yes, for once, a good IPO. A thumbs-up from me, but remember: I’m not an advisor and I haven’t even done the deep level of research I usually do. This is an “on-the-face-of-it” analysis.