In June, this year, the government had kicked-off its plan to fund energy transition projects of three big state refiners — the Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation (HPCL) in exchange for equity.
IOCL, one of India’s largest oil refiners and a Maharatna company recently announced that it will be raising capital by way of a rights issue, for an amount not exceeding ₹ 22,000 crores, subject to the receipt of necessary statutory approvals.
A rights issue involves offering rights to a company’s existing shareholders, allowing them to purchase additional shares directly from the company at a discounted price, rather than buying them through the stock exchange.
The company in an exchange filing said that details like the issue price, right entitlement, record date, issue open date, issue closure dates, and terms of payment will be informed in due course.
In another development, it has formed a joint venture company for battery swapping business in India, as a private company with a 50:50 collaboration between Indian Oil and Sun Mobility Pte. Singapore. IOCL will invest ₹ 1,800 crores. The board has also accorded approval for an investment of USD 78.31 million in IOCL Singapore Pte. Ltd., Singapore (a Wholly Owned Subsidiary of IndianOil) for the acquisition of Preference Shares and Warrants of SMS. These investments are subject to receipt of necessary statutory/ regulatory approvals.
With a market capitalization of ₹ 1,40,083 crores, IOCL is a large-cap company. It has a low return on equity of 7.17% and an ideal debt-to-equity ratio of 1.07. Its shares were trading at a price-to-earnings ratio (P/E) of 13.95, which is significantly higher than the industry P/E of 5.13, indicating that the stock might be overvalued as compared to its peers.
The company’s promoters own a 51.50% stake, followed by retail investors with 29.85%, domestic institutions with 9.49%, foreign institutions with 6.91% and mutual funds with 2.25%.
Written by Simran Bafna
