Analysts bullish on full subscription of OIL IPO on Day 1

With investors looking bullish on public sector undertakings, the initial public offering of Oil India -- the second state-run to firm to hit the capital market this year -- starting tomorrow is expected to elicit good response, analysts said.

OIL has fixed a price band of Rs 950-1,050 per share for the IPO, which is expected to raise up to Rs 4,982 crore.

"Despite the aggressive pricing, the public offer of OIL will sail through comfortably and would be fully subscribed within hours of opening as investors still want to invest in PSU IPOs," Taurus Mutual Fund Managing Director R K Gupta said.

The OIL IPO, which would close on September 11, comes a month after the successful offering by hydroelectric power generator NHPC. The shares of OIL would be listed on the bourses on September 29.

The IPO of state-run hydro-power company NHPC received robust response from investors with the issue getting subscribed nearly 24 times. The company raised over Rs 6,000 crore from the IPO, marking it as the second biggest public offer after Reliance Power last year.

"There is demand in the market and the government is trying to capitalise on that... State-run companies have a good track record of investor returns and they want to raise as much money possible," Gupta said.

Both retail investors and institutional players would be betting more on OIL, he noted.

According to analysts, aggressive pricing of the government IPOs would gradually lead to investors taking a cautious stance before investing in them in future.

"There is not much left for the investors. These days even PSUs are not leaving money on table for retail investors and in due course of time the huge demand generated will also come down," SMC Capitals Equity Head Jagannadham Thunuguntla said.

Further, the listless debut of NHPC and Adani Power on the bourses, seem to have dampened the aggressiveness in the IPO financing market.

"Post the disappointing debut by NHPC on the bourses the IPO financiers were forced to pay the interest cost on the borrowing out of their pocket. This has somewhat dented their investment spirit," Thunuguntla added.

Source: EconomicTimes