Sunday, 6 September 2009

Oil India — IPO: Invest at cut-off

Oil India (OIL) may not be in the same league as Oil and Natural Gas Corporation (ONGC) in terms of its size of business, extent of reserves or scale of operations.

Where it scores over its big brother though is in its ability to show a growth trend in crude oil production and in adding to its reserves, more than what it produces every year.

OIL’s offer at Rs 950-1050, is at a fair valuation that compares favourably with its peers on most parameters. The offer band is at a price-earning multiple (PEM) of 9-10 times the 2008-09 earnings. ONGC has a valuation of 16. OIL also compares favourably on price-to-book value terms with a ratio of 2-2.2; ONGC’s is at 3.2.

Unlike other recent IPOs, OIL has left something on the table for investors. Investors can subscribe at the cut-off price and hold the stock for the medium-term.

Source: thehindubusinessline

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DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.