Indian Oil shares hit 52-week high as board considers fundraising via rights issue

The government, which is the majority owner of the company, is likely to subscribe to the rights issue and infuse equity in the company.

Recently, Fitch Ratings said that capital raising plans of Oil Marketing Companies (OMCs), including IOC, should strengthen their capex spending and the credibility of their emission-reduction plans. An injection of capital from the government would provide further evidence for assumption that the OMCs would receive extraordinary sovereign support if needed, the key factor underpinning their stable ratings, the credit rating agency said.

OMCs have suffered significant losses in the first half of previous fiscal FY23 on the back of high crude oil prices amid Russia's invasion of Ukraine. Shares of OMCs have surged lately as fund raising plans of the companies have enthused investors.

In the last one-month period, shares of state-owned oil refiners — Bharat Petroleum Corporation Ltd, IOC, Hindustan Petroleum Corp Ltd — have risen 10-16 percent and around 18-33 percent during the past three months.

BPCL's board of directors had on June 28 approved a proposal for raising capital upto an amount not exceeding Rs 18,000 crore through rights issue.

There is an expectation that HPCL will also come up with a proposal for an equity issue. The company is said to be looking at a preferential share allotment to the government.