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The Times: Cairn aims to raise $1.4bn in launch of India’s biggest IPO (another Shell debacle)

December 11, 2006
Ashling O’Connor in Bombay

High-profile issue of 329m shares
Developing three promising oilfields
 
India’s biggest initial public offering starts today when Cairn Energy, the British oil and gas exploration company, launches its Indian subsidiary.

Nearly 329 million shares in Cairn India, or 18 per cent of the equity, go on sale to Indian investors in a high-profile launch expected to be heavily oversubscribed. The offer, which closes on Friday, aims to raise $1.4 billion (£720 million).
 
Cairn India shares have been priced between 160 and 190 rupees (£1.80-£2.20), giving the group a market value between $6.3 billion and $7.5 billion. This puts it in the top 25 companies on the Indian stock exchange.

The issue, eclipsing National Thermal Power Corporation (NTPC)’s $1.2billion floation in 2004, reflects the Edinburgh-based Cairn Energy’s dependence on India for 95 per cent of its value. Much of the money raised from the IPO will be returned to Cairn Energy shareholders. Analysts expect this figure to be about £500 million. A large part of the proceeds will be channelled towards construction and development work on the company’s oil blocks in Rajasthan. Cairn’s prospectors estimate that they contain an equivalent of 3.6 billion barrels. The state-run Oil and Natural Gas Corp (ONGC) owns a 30 per cent stake in the project.

The fields were producing 4,000 barrels a day of crude when the company bought them from Royal Dutch Shell for £4 million. The daily yield is now more than 50,000 barrels.

Cairn India will invest $1.5 billion in developing three oilfields. Commercial production from Mangla, a field with estimated reserves equivalent to 300 million barrels, is set to start in 2009 and expected to peak at 150,000 barrels daily. By 2010, Cairn expects to control a fifth of India’s oil production. It is awaiting news on bids for 12 new exploration licences.

Under a production-sharing contract, the Indian Government — through its nominee Mangalore Refinery and Petrochemicals Ltd (MRPL), a unit of ONGC — is responsible for building a 350km pipeline to transport the waxy crude to refineries, but a dispute over the agreement has overshadowed the IPO. MRPL claims that it would build the $400 million pipeline only if it was economically viable. Cairn India, which has investigated building the pipeline itself, said that it would resolve the matter by the middle of next year.

Interest in the shares has already been tested: a pre-IPO private placement of 12 per cent of the equity to several institutions raised $823 million.

Petronas, Malaysia’s state-owned energy company, acquired a 10 per cent stake at a price of 176.48 rupees a share.

After the offer, Cairn Energy, founded in 1988 by former Scotland rugby international Sir Bill Gammell, will own a 69.5 per cent stake in Cairn India.
 
http://business.timesonline.co.uk/article/0,,16614-2497756.html

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