Cairn Energy Plc is the company in question, and the simple fact that 90 per cent of its current market value can be traced back to its Indian operations could be one reason for the company's decision to list in India. Another could be the company's decision to invest $1.5 billion or Rs 7,050 crore (on behalf of the whole project), over the next 30 months in Rajasthan where its discoveries add up to a significant 1 billion barrels (recoverable oil); at its peak production, the company's Rajasthan fields should produce a little over 54 million barrels a year. Neither of these reasons, however, seem to be relevant. International investors seem to understand the oil business better and value firms in the sector higher (ONGC's forward price-earnings multiple, for 2006-07, is a mere 9.49 by some estimates); and Cairn recently tied up some $1 billion (Rs 4,700 crore) in debt to fund its plans for Rajasthan.
The real reason, claim analysts who point out that Cairn is "an M&A amenable company", is that the IPO could serve as a valuation exercise in the run-up to a sell-off.
Arun Natarajan is the Founder of Venture Intelligence, which tracks private equity and venture capital in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.