Indian Oil shares trade ex-bonus. Buy or Hold? What ICICI Securities recommends
Premium- Indian Oil had made an announcement regarding bonus shares issue in May
Shares of Indian Oil Corporation (IOC) plunged more than 1% to ₹73 apiece on the BSE in Friday's trading session on the record date of the bonus shares issue. The stock started trading ex-bonus from Thursday, June 30, 2022.
The oil marketing company (OMC) had made an announcement regarding its bonus shares issue on May 17. Issue of bonus shares is in the ratio of 1:2 i.e. one new bonus equity share each for every two existing equity shares and record date for the same is July 1. Bonus shares are fully paid additional shares issued by a company to its existing shareholders.
“Accordingly, the share price has been adjusted to opening price of ₹73/share against closing price of ₹110/share yesterday. Hence, we revise our target price to ₹85/share post this corporate action. We maintain our HOLD rating on Indian Oil shares," said domestic brokerage and research firm ICICI Securities in a note.
Key triggers for future price performance, as per the brokerage are, global product cracks sustaining at higher level, passing on higher retail prices of petrol & diesel to customers (due to higher crude oil costs), pipeline segment profitability has been consistent over the last few years, and consistent dividend payout.
Indian Oil Corporation (IOC) is India’s largest refining & marketing company with an installed refining capacity of around 70 MMT. IOC operates 32062 retail outlets as of end of FY21. Petrol and diesel together historically constitute around 52% of marketing sales.
Indian Oil reported a 31% drop in the fourth quarter ended March 2022 net profit at ₹6,021 crore as record refining margins were wiped away by a margin squeeze in petrochemicals and losses on auto fuel sales. The state-run oil marketing company reported revenue of ₹2,06,461 crore during the quarter under review, as compared to ₹1,63,733 crore logged in the corresponding quarter of the previous financial year.
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