Indian Oil Corporation (IOC) Share Price may fall to Rs 164.65, know what is the latest news
Indian Oil Corporation (IOC) announced the withdrawal of its proposed ₹22,000 crore rights issue. This decision has significant implications for the company and the broader oil marketing sector in India. The cancellation comes after the Ministry of Petroleum and Natural Gas (MoP&NG) informed IOC that no funds would be allocated for capital support to Oil Marketing Companies (OMCs) in the 2024-25 budget.
Initially approved on July 7, 2023, the rights issue was intended to raise capital through the issuance of equity shares. However, during a board meeting on September 30, IOC’s management decided to retract this proposal. The government’s non-participation was a key factor in this decision. The MoP&NG had previously suggested an allocation of ₹30,000 crore for OMCs in the budget, but this was ultimately omitted, leaving IOC without necessary backing from its principal promoter—the government.
In its official statement, IOC explained: “In view of the Government of India’s (Promoters) non-participation in the Rights Issue, the Board has decided to withdraw the proposed Rights Issue of equity shares.” This move reflects a cautious approach amid shifting regulatory and financial landscapes.
Implications for IOC and OMCs
The cancellation of the rights issue raises concerns about IOC’s financial health and its ability to navigate future challenges. The company reported an alarming 81% decline in standalone net profit for the quarter ending June 2024 compared to the same period last year. Revenue from operations also saw a slight decrease of 2% year-on-year.
Market analysts are closely monitoring how this decision will impact IOC’s stock performance. Despite recent fluctuations, IOC shares managed to recover slightly after the announcement, trading at ₹180.30—up by 0.22%. Over the past year, IOC’s stock has seen substantial growth, increasing by approximately 98%, which indicates a level of investor confidence despite current uncertainties.
Broader Market Context
IOC’s decision has broader implications for other players in the oil marketing sector. Bharat Petroleum Corporation Ltd. (BPCL), another major OMC, recently received board approval to raise ₹18,000 crore via a rights issue. Market watchers are now speculating whether BPCL will proceed with its plans or reconsider its fundraising strategy in light of IOC’s recent withdrawal.
The oil marketing sector is currently under pressure due to potential fuel price cuts and negative margins on liquefied petroleum gas (LPG). Analysts from BoFA Securities have indicated that OMCs could face significant earnings per share (EPS) reductions if fuel prices are adjusted downward. This scenario raises questions about profitability and operational sustainability for companies like IOC and BPCL.
Stock Performance Overview
- Current Share Price: ₹180.30
- Year-to-Date Growth: Approximately 38%
- 52-Week Low: ₹85.51
- 52-Week High: ₹196.80
IOC stock has been trading above various moving averages, suggesting some resilience despite recent challenges. The company’s price-to-equity (P/E) ratio stands at 8.91, while its price-to-book (P/B) value is at 1.44, indicating potential undervaluation relative to its assets.
The withdrawal of Indian Oil Corporation’s ₹22,000 crore rights issue highlights significant shifts in government support and market conditions affecting OMCs in India. As companies navigate these changes, all eyes will be on how they adapt their strategies moving forward.
