The Government of India (GoI) has launched an offer for sale (OFS) of 242.8 million equity shares of Rs 10 each of Indian Oil Corporation (IOCL) aggregating to 10% of the total paid-up equity share capital. The current market price of the stock is Rs 395 and floor price is expected at 2-4% discount to the current market price. Retail investors will receive shares at a discount of 5% and are allocated 20% of issue size.
ICICIdirect said it has neutral view on the OFS. 'The new 15 mmt refinery complex at Paradip will be fully commissioned by end of Q2FY16. Even though the decline in fuel subsidies will improve the visibility of earnings; refining margins will be the key,' it said.
Further the stock broker said, 'At the current price of Rs 395, IOC is available at P/E of 11.7x and P/BV of 1.2x on FY17E numbers. Assuming floor price of Rs 385-390 and retail investors discount of another 5%, price comes to Rs 366-371 a share.
The stock is fairly valued at the current market prices given the volatility in crude oil prices and refining margins. We value the stock at Rs 390. We remain 'Neutral' for IOCL.''
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