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Disinvestment of GoI & Listing OIL’s Share By T. K. Ananth Kumar, Director (Finance), Oil India Limited

Oil India Limited is a premier Indian National Oil Company, engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG from its produced gas. OIL is engaged in conducting exploration activity both in India and overseas through JV agreements and PSCs with other oil companies and has 52 years of experience in this business.

Government of India as a majority share holder decided to list OIL share in both the stock exchanges of India (BSE and NSE) through Initial Public Offering (IPO) not only to raise fund for meeting its various exploratory & development activities but to unlock the potential of OIL share in the landscape of corporate entities.
Therefore the project here is listing of OIL’s share on Bombay Stock Exchange and National Stock Exchange through initial public offering as per the timeline set by the Government of India.

It was a mammoth task for a company like OIL who maintained a low profile status in the hydrocarbon sector in India while comparing with its peer company. Oil India Limited whose majority of the revenue comes from the North East part of the country where it manages its oil & gas fields has always been branded as a North East based company in spite of its NOC status. However the Management of OIL accepted the challenge and played a crucial role in executing each assignment of the project to realize its objective.

It required meticulous planning and well coordinated multipronged approach to transform OIL’s image from a low profile company to a highly visible corporate in front of general public, strategic investors, analysts, media, etc. for successfully list OIL share in the stock exchanges of India.

OIL approached Government of India to grant approval for listing its share in both the exchanges (BSE & NSE) of India. Government of India as the majority share holder of OIL accorded its approval through MOPNG to OIL for issue of fresh equity capital for raising fund through Initial Public Offer (IPO) to meet exploratory and developmental activities of OIL. GoI also decided to disinvest 10% of its pre issue equity stake in OIL for meeting its financial requirements. The proposed IPO and disinvestment plan of OIL’s equity capital given below.
i) Initial Public Offer of 11% post issue capital amounting to 26.4 million shares
ii) Disinvestment of 10% pre issue equity capital amounting to 21.4 million shares

While it was planned to issue fresh equity capital as above through IPO, disinvestment of 10% pre issue capital to three oil marketing companies by GoI proposed to be distributed as under.
i) IOCL-5%
ii) BPCL-2.5%
iii) HPCL-2.5%

Management of OIL formed an IPO Committee consisting of Functional Directors of OIL including Chairman and Managing Director (CMD) and a Project Management Team consisting of the Executives from different departments of OIL under Director (Finance) as Project Coordinator. They were initially briefed about the whole IPO process including the various milestones.

With no expertise in IPO process, OIL Management galvanized its limited resources and deliberated in details the strengths and weaknesses to draft the work plan for the Project execution.

The Broad Activity list to progress as per the objective of the project has been prepared internally by the project coordinator. In order to progress as per the work plan, various outside agencies were engaged such as Lead Managers, Statutory Auditors, Underwriters, International Legal Counselor, Domestic Legal Counselor, Monitoring Agency, Registrar, Legal Counsels, Grading Agency, Registrar to the Issue, Depositories, Printers etc.,  for successful implementation of OIL’s IPO activities.

Apart from engagement of various experts as stated above it was necessary to prepare the detailed offer document. The Project Management Team formed internally for the purpose of preparing the offer document (DRHP/RHP) had to give their quality effort and time. Considering the type of assignment and the work involvement the team required to educate themselves adequately and execute spirited effort to complete the assigned task as per the timeline. The team spirit which was built in a gradual manner kept the tempo of the team very high throughout the IPO process till the listing of the OIL share in both the stock exchanges of India. 

All the activities both internal and external were closely monitored with necessary mid course correction by the Project Coordinator to bring in better corporate visibility for the successful listing of Company’s share.

The Road Shows were held in-country as well as overseas to show case the strength and capability of the Company. The Road Shows organized for OIL IPO was well attended by a sizeable number of receptive crowds consists of potential investors, analysts, brokers, etc. in various locations. The queries and doubts raised by the potential investors, analyst, and brokers during the road shows were cleared by the attending OIL Team. The marketing initiative undertaken by the project team of OIL to create awareness among the general public, potential investors, analysts and brokers resulted in creating a conducive environment for OIL IPO in spite of prevailing adverse condition considering very poor listing of PSU share just before the OIL IPO.

The chronology of events while executing various assignments for OIL’s IPO indicated as under.
Approval was accorded by MOPNG for issue of fresh equity capital and listing of the Company’s share in the stock exchanges of India on September 11, 2007. MOPNG also approved disinvestment of 10% GOI’s pre issue equity capital to downstream oil PSUs (IOCL, BPCL & HPCL).
OIL completed appointment of BRLMs and other intermediaries / agencies.
Approval accorded by OIL board for the IPO and Disinvestment on September 12, 2007.
Kick off meeting with the BRLMs and other intermediaries on September, 25, 2007.
Signing of Memorandum of Understanding between Oil India Limited and Book Running Lead Managers December 12, 2007.
DRHP was prepared as per the timeline and filed with Securities and Exchange Board of India (SEBI) on December 14, 2007.
The Share Purchase Agreement amongst Government of India (GOI), IOCL, HPCL, BPCL and the Company for sale/purchase of the 10% holding of the GOI in OIL was executed on 27.12.2007
Subsequently with the appointment of the Independent Directors in July, 2008 various Committees were constituted as per the requirements of clause 49 of the Listing Agreement and the compliance report & updates of the DRHP were submitted to SEBI.
The Company received the observations related to DRHP from SEBI which had been suitably replied/ corrected.
The Company received the approval of the Securities and Exchange Board of India granting permission to launch the IPO on September 11, 2008 and accordingly time table was prepared to launch the issue in a November, 2008.
Last quarter in calendar year 2008 witnessed a turbulent world market due to US/European Union’s economic recession. It has affected the market condition of South East Asia including India. Accordingly a meeting was held in the Ministry of Petroleum and Natural Gas in connection with IPO of the Company on 6th Oct, 2008 to assess the situation in view of the turbulent market conditions.
It was subsequently decided to defer the Initial Public Offer of OIL till the market condition stabilizes although SEBI approval was there. SEBI extension was obtained from 90 days to one year.  The market condition was closely monitored to launch the issue at an appropriate time.
After about a gap of seven months GoI having received fresh decisive mandate accorded its approval to OIL on May 16, 2009 to proceed with IPO observing some improvement in the market condition through MOPNG.
Accordingly a detailed activity schedule was drawn for the balance activities and the activities were put on fast track with close monitoring.
The updated Draft Red Herring Prospectus was filed to SEBI on July 27, 2009 with all the chapters duly amended with latest figures & facts and incorporating SEBI comments / observations.
Signing of Escrow Agreement and Syndicate Agreement of Oil India Limited with Book Running Lead Managers, Escrow Bankers, Refund Banker and Syndicate Member was completed on August 28, 2009.
Signing of Underwriters’ Agreement by and among Oil India Limited, Book Running Lead Managers and Syndicate Members September 14, 2009.
Securities and Exchange Board of India accorded its final approval to OIL on August 06, 2009 for the IPO.
After getting SEBI’s nod OIL initiated a pre marketing drive during the period from 10th August, 2009 to 13th August, 2009 covering in-country and overseas strategically suitable location.
Red Herring Prospectus (RHP) and Price Band were approved by the Board on August 21, 2009.
Empowered Group of Ministers (EGOM) approved the Price Band for the Initial Public Offer of the company on August 24, 2009.
Price band finalized as INR 950 to INR 1050 by EGOM per equity share of OIL of INR 10 face value on August 24, 2009.
Red Herring Prospectus (RHP) in connection with IPO was filed with ROC on August 25,2009 with Price Band duly incorporated.
ROC cleared RHP for OIL’s IPO on August 25, 2009 on the same day.
Initial kick-off meeting with media, brokers & analysts held on 24th August, 2009 at Mumbai.
International Road Shows were held during the period from August 31, 2009 to September 04, 2009 to communicate with strategic investors, brokers to share information related to OIL’s IPO.
In-country Road Shows were held during the period from August 28, 2009 to September 04, 2009 to communicate with strategic investors, brokers, etc.
Issue was offered from September 07, 2009 to September 10, 2009.
Prospectus was approved by the Board on September 11, 2009 and also final price was recommended by Board for EGOM’s approval.
Meeting of Empowered Group of Ministers (EGOM) was held for finalization of OIL’s share price and inter-se allocation of shares among different categories of investors for IPO on September 14, 2009.
Share Price of OIL was finalized as INR 1050.
JM Financials, Morgan Stanley, City and HSBC engaged as BRLM for OIL’s IPO involved during the entire process of IPO.
M/s Amarchand Mangaldas and M/s ASHRUST engaged by OIL as domestic counselor and international counselor respectively contributed as per their role. M/s Luthra & Luthra engaged by BRLMs as counselor for reviewing on behalf of the merchant bankers played their critical role while preparing the RHP.
Transfer of funds to government account for the sale of 10% pre-issue capital of Oil India Limited in favour of IOCL, BPCL and HPCL, dated September 9, 2009.
Prospectus filed with ROC on September 15, 2009 immediately.
Received ROC approval on September 15, 2009.
NSE approved the basis of allocation on September 22, 2009.
Listing of OIL’s share in both the exchanges of India completed on September 30, 2009.
OIL raised INR 27772.5 million from 11% fresh post issue equity capital amounting 26.4 million shares. An amount of INR 22470.5 million was raised by disinvestment of 10% pre issue equity capital (21.4 million shares) from GoI’s equity holding.

Disinvestment of OIL’s 10% pre-issue paid up equity capital (21.4 million shares) by GOI (in the ratio 2:1:1)

(i) Entire IPO Process went about very smoothly and successfully. No Law suit was instituted against the Company.
(ii) All the IPO Grievances / Queries of the Investors were attended to their satisfaction.
(iii) Even though OIL is a debutant in the Stock Market, It has become a Bell- Weather Stock in the Industry.
(iv) Achieved Highest Market Cap: Rs. 37510 crores which is among the top 30 in market capitalization.
GOI had acknowledged our commitment to task in a befitting manner at various forums.
(vi) Secretary, Petroleum and Natural Gas had also lauded the effort of the OIL management appreciating the effective handling of the entire IPO Process issuing appreciation letter.
(vii) OIL IPO’s success story has given a big push for the aggressive disinvestment of other eligible PSUs.
(viii) Above all, the post Listing Performance of the Company is commendable and the continuous interaction/communications with the Investor Community also helped maintaining the price.

The target milestones were achieved on the stipulated time lines. The IPO was a smashing success despite being in the high price range of Rs. 950 - Rs. 1050/- per share which was the second highest price in the market after the Jet Airways IPO and highest for any PSU IPO.

The whole IPO process was completed in record time by diligently executing Project Management skills and OIL Shares were successfully listed on National Stock Exchange and Bombay Stock Exchange on 30th September, 2009. It was a well executed project with excellent coordination among all the agencies engaged for the IPO including the support of MOPNG and Department of Disinvestment.

The overwhelming response and interest shown by the investors for OIL’s share made it a landmark IPO. The confidence reposed by strategic investors, general public, and analysts for OIL’s share has changed the prevailing Indian equity market and opened up opportunity for other PSU for such endeavor. The accolades received for the success of the IPO from various quarters considered to be a remarkable achievement for OIL. The success and the whole project management effort was duly appreciated and acknowledged by Shri. R. S. Pandey, Secretary, MOPNG and Shri. Sidhartha Pradhan, Joint Secretary, Department of Disinvestment, MOF.

The Company duly recognized the meritorious services rendered by BRLMs and various intermediaries viz. ILC, DLC, Advertising Agency, Registrars and Statutory Auditors in making the IPO a grand success. A commendation letter was sent to them in this regard.

The Company acknowledges the involvement of the Government of India in the Ministry of Petroleum & Natural Gas and support of all other Ministries and other agencies in Central and State Governments.

OIL expresses its gratitude and thanks to the Shareholders, Customers, Suppliers and other business partners/associates for their continued co-operation and patronage and also wish to place on record sincere appreciation for the dedicated contribution by the Oil Indians.

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   RNI No. WBENG/2008/27737
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