India-Oman venture plans IPO

FUNDING EXPANSION: Bharat Oman Refineries is looking to raise up to $625 million through an IPO. (AFP)

India's Bharat Oman Refineries, an equal joint venture between state-run Bharat Petroleum Corporation (BPCL) and Oman Oil Company, filed papers on Friday for an initial public offering (IPO), a senior company official said.

"We are coming to the market with a strong promoter backing and a project which is 50% complete and are confident that our's is a good offer which will be reasonably priced," D.M. Naik Bengre, senior vice-president at Bharat Oman, said.

Four sources directly involved in the deal, from BPCL and bankers to the issue, had earlier on Friday told newswire Reuters the company plans to file for an IPO, shrugging off concerns about investor appetite for offerings.

The sources had said the company planned to sell about 48% through the public offer and a pre-IPO placement to raise up to 25 billion rupees ($625 million).

Naik Bengre said the total figure would be known later.

"We have kept the structure of the IPO open and will finalise the actual amount to be raised only after arriving at a price during the pre-IPO placement," he told Reuters.

Bharat Oman is building a 120,000 barrels per day (bpd) refinery at a cost of 104 billion rupees, and Naik Bengre said it would be funded through loans of 64 billion rupees and remaining through equity.

The refinery at Bina in the central Indian state of Madhya Pradesh is expected to be commissioned in January 2010, Bharat Petroleum said in a separate statement.

Oman Oil's holding in the venture will fall to less than 10% after the IPO, banking sources said. Bharat Petroleum aims to hold up to 48% and its board has approved to invest 19.96 billion rupees in the IPO.

The Madhya Pradesh government would also hold about 2% stake in the venture, Naik Bengre said.

The banking and company sources had said Bharat Oman could sell more than 20% in a pre-IPO placement to financial investors.

"We are not talking to strategic investors any more and are keen on having financial investors," a company source said.

Naik Bengre declined comment on the size of placement, but said the company was keen on financial investors.

BPCL runs a 240,000 bpd refinery in Mumbai, India's financial hub, and another 150,000 bpd refinery in Kochi in the southern state of Kerala. Its subsidiary Numaligarh Refinery runs a 60,000 bpd refinery in north-east India.

Its shares, with a market value of $3.7 billion, ended 5.5% up at 433.75 rupees in a Mumbai market that rose 2.2%. But, the stock is down more than 17% in 2008.

The IPO will be a test of investor appetite in India's stock market that has fallen 19% this year in the wake of global market turmoil, after rising 45% on average the previous three years.

SBI Capital Markets, Citibank and ICICI Securities are among the arrangers of the issue, sources said.

IPOs for $13.7 billion have been withdrawn in Asia in 2008, Thomson Financial data shows, including large Indian offers from property developers Emaar MGF Land, DLF Offices Trust and Unitech Office Trust.

Asian refiners are adding capacity to feed demand in developed nations where there has been little expansion in recent years and India hopes to become a regional refining centre.

India, Asia's third-largest oil consumer, plans to expand its refining capacity by 62% to 4.82 million bpd by 2012, to take advantage of its proximity to oil sources and emerging markets. (Reuters)

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