India's Oil and Natural Gas Corporation Shares Soar as Investors Snap Up Government's Stake

Strategic Insights -

Indian investors rushed to purchase shares in the country's largest company by market capitalisation, Oil and Natural Gas Corporation, after the government announced a $2.5 billion sale of a 10% stake. The sale was fully subscribed within 10 minutes, providing a boost to a market that has stalled this year due to concerns about a high volume of new issues. The market had experienced a robust 2003, driven by positive factors such as a strong monsoon, reforms, rising consumer demand, and falling interest rates, resulting in a 15-year high GDP growth of 8%. Foreign institutional investment inflows rebounded to $6.7 billion, lifting the BSE 30 index by 81% in US dollar terms.

Key Takeaways:

  • The Indian government's sale of a 10% stake in Oil and Natural Gas Corporation was fully subscribed within 10 minutes, indicating strong investor demand.
  • The market had a robust 2003, driven by a strong monsoon, progress on reforms, rising consumer demand, and continued fall in interest rates, resulting in a 15-year high GDP growth of 8%.
  • Foreign institutional investment inflows rebounded from $735m to $6.7 billion in 2003.
  • Merrill Lynch estimates that there could be a potential $6-7 billion of equity issuance this year from the government and private sector.
  • With earnings growth of about 15% expected this year, the market is now trading on a prospective multiple of about 14.5 times, with a fundamental case for a re-rating above this not being strong.

Statistics:

  • $2.5 billion: Amount of the government's sale of a 10% stake in Oil and Natural Gas Corporation
  • 10 minutes: Time it took for the sale to be fully subscribed
  • $735m: Foreign institutional investment inflows in 2002
  • $6.7 billion: Foreign institutional investment inflows in 2003
  • 15%: Expected earnings growth this year
  • 14.5 times: Prospective multiple of the market
  • 8%: 15-year high GDP growth in 2003
  • 81%: Increase in the BSE 30 index in US dollar terms in 2003
  • $6-7 billion: Potential equity issuance from the government and private sector this year
  • Late April: National polls in which the government's rush to sell a series of equity stakes was seen as a trigger for a pause in the market.

Sources:

  • Unnamed article in the Financial Times, cited in the provided text (no date or publication date mentioned)
  • Merrill Lynch estimates, as mentioned in the article (no specific source or date mentioned)