FIIs bet big on oil sector as govt adopts reform measures

Increase stakes in Oil India, HPCL, IOC and BPCL in second half of FY13

Foreign institutional investors (FIIs) are betting big on the Indian oil sector. With the government adopting reforms-related measures in the second half of the previous financial year, oil counters witnessed buying interest from foreign investors.

Oil India, a Navratna company, saw the highest participation, thanks to the offer for sale (OFS) transaction in February this year. FIIs took their holding substantially up in the oil giant by 6.23 per cent during the second half of FY13 to 7.65 per cent as on March 31, 2013.

Oil India, which became a wholly state-owned enterprise in 1981, is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of liquified petroleum gas (LPG).

Meanwhile, the company declared two successive interim dividends in the January-March quarter amounting to Rs 23 a share. On Friday, shares of the company closed firm at Rs 530.9, up around two per cent. The counter had touched its 52-week high in January when it crossed the Rs 600 mark.
Hindustan Petroleum Corporation Ltd (HPCL) was another hot favourite of FIIs from India’s oil counters. Foreign investors increased their stake in the company by 3.5 per cent to close to 10 per cent against 6.24 per cent as on September 2012.

Similarly, Indian Oil Corporation (IOC), the country's largest oil-marketing company, saw FII holding inching up 87 basis points (bps) to 1.91 per cent during the later half of FY13. One basis point is a 100th of a percentage point.

The government of India offloaded a 10 per cent stake in the company via the OFS route and offered 60.1 million shares at a floor price of Rs 510 to raise around Rs 3,100 crore. The issue attracted bids for 154 million shares worth nearly Rs 8,000 crore or about 2.5 times the offered shares.

The latest shareholding data of Bharat Petroleum Corporation Ltd (BPCL) is not yet available on the stock exchanges. However, the trend till the December quarter shows a rising holding of FIIs on the counter.

Market participants had hinted that if oil-related reforms were implemented well, it would result in a total turnaround of the sector leading to its re-rating.

Interestingly, domestic institutional investors (DIIs) do not seem gung-ho about the oil story. Barring, Oil India, DIIs chose to cut their holdings in IOC and HPCL.