New Delhi: Indian Oil Corp (IOC) is betting its biggest profit gain in at least 11 years will help lure investors to a share sale that may raise a record Rs195.5 billion (Dh16.15 billion).

Net income rose more than 18-fold to Rs52.9 billion (Dh4.30 billion) for the three months ended September 30, from Rs2.8 billion a year earlier, after the government compensated state-run Indian Oil for below-cost fuel sales, the New Delhi-based company said in a statement on Saturday. That compared with the average Rs10.6 billion estimate of 16 analysts surveyed by Bloomberg.

"Investors look at profits, and this quarter has been very good," Chairman B.M. Bansal said in an interview in New Delhi. "People are aware that the government compensates the company: people will bid with that in mind."

Prime Minister Manmohan Singh's administration and the company plan to sell equity in the quarter ending March after overseas investments pushed India's benchmark Sensitive Index to an all-time high this month. The offering may be the nation's largest share sale, surpassing State Bank of India's 2008 rights offer, according to data compiled by Bloomberg.

Asset-sale programme

The government, which holds 79 per cent of Indian Oil, plans to sell a 10 per cent stake as part of an asset-sale programme aimed at cutting the budget deficit. The refiner will also offer shares equivalent to a similar stake to reduce debt as it builds a new refinery and looks for possible ventures overseas.

Indian Oil's shares have gained 34 per cent this year, outpacing the 15 per cent increase in the Sensitive Index. The stock gained 2.1 per cent to Rs410.90 early yesterday.

The combined share sale, based on Friday's closing stock price, may surpass the previous record of the Rs167.4 billion raised by State Bank, India's largest lender, Bloomberg data show. It would also best Coal India Ltd's Rs154.8 billion record initial public sale in October, and ICICI Bank Ltd's $2.46 billion US offering in 2007, the data show.

The share-sale efforts may be bolstered by accelerating economic growth in India, which aims to expand gross domestic product at an average annual rate of 10 per cent, up from the 8.5 per cent forecast for this year.

The nation freed gasoline prices from state control in June while continuing to set rates for other fuels, including diesel.

"The economy is on the move and demand for cars and automobiles is increasing," said D.K. Aggarwal, who manages about $100 million as chairman of SMC Wealth Management Services Ltd. in New Delhi. "Free gasoline prices will bring in more stability to income and that would attract investors."

  • 195.5b: value in rupees may be raised in IOC share sale
  • 10%:  government plans to sell stake in IOC
  • 34%: rise in firm's share price this year