Indian Oil Withdraws Rs 22,000 Cr Rights Issue Amid Govt’s Non-participation
Withdrawal follows the Union Budget's lack of capital support for Oil marketing companies, raising concerns over potential price cuts and profitability
Indian Oil Corporation (IOC) has announced the withdrawal of its proposed Rs 22,000 crore rights issue, as per its recent exchange filing. The company had initially approved this fundraising plan on 7 July 2023, pending statutory approvals.
However, in the Union Budget, the Ministry of Petroleum & Natural Gas revealed that no funds were allocated for capital support to Oil Marketing Companies (OMCs), against the anticipated Rs 30,000 crore.
"In view of the government's non-participation in the rights issue, the board has decided to withdraw the proposed rights issue of shares," IOC stated in its filing.
The government currently holds a 51.5 per cent stake in IOC, as per the June quarter data. This move also raises questions about Bharat Petroleum Corporation Limited's (BPCL) approved Rs 18,000 crore rights issue.
The OMCs are under scrutiny over potential fuel price cuts. According to BoFA Securities, price reductions, ongoing negative LPG marketing margins, and weak Gross Refining Margins remain concerns. The brokerage noted that a Rs 1 per litre cut in petrol and diesel prices could impact Hindustan Petroleum Corporation Limited’s (HPCL) FY25 consolidated EPS by 36 per cent, BPCL by 26 per cent, and IOC by 21 per cent.
Shares of IOC have shown resilience, trading 0.2 per cent higher at Rs 180.4 after recovering from earlier lows. While the stock has remained flat over the past month, it has risen by 40 per cent in 2024.
