NRL has been jointly promoted by Bharat Petroleum, which has a 32 per cent stake, IBP (19 per cent) and the government of Assam (10 per cent). The 3-million-tonne project is nearly 95 per cent complete and is expected to be commissioned early next year.

Sources said the size of the issue would be pruned depending upon Oil India's decision to take a stake in the refinery. According to them, the board of Oil India has already given the go-ahead to take a stake of around 10 per cent which will translate into Rs 95 crore. This would bring down the size of the public issue to around Rs 250 crore.

The board of Oil India has, reportedly, cleared the proposal to participate in the project but the final nod will have to come from the ministry of petroleum andnatural gas. At one point, even the Oil and Natural Gas Corporation (ONGC) was tipped to take a portion of the equity, (around 12 per cent) but changed its mind later.

Even though the NRL offer has a clear plus in the pricing of the issue at par, observers say that the state of the market still remains the key. A major factor that will influence its health at that time would be the disinvestment programme currently planned which envisages offloading some blue chip public sector units' shares at a discount to the retail investor.

This is essentially being done to revive the market and, if successful, will go a long way in paving the way for further issues like NRL, observers say. Another determining factor is the fact that the refinery could be a key link to supply of petro-products from Numaligarh to Bangladesh and Myanmar. This could offset a perceived disadvantage of its size as all other refineries in the country have capacities of 6 and 9 million tonnes.

Even if the issue were to be shelved orpruned due to poor market sentiment, sources say the main promoter, BPCL, could still subscribe to a portion so that its stake would increase to 49 per cent. The government is keen on the project going which means that there would be little problem getting money from the Oil Industry Development Board (OIDB).

The project, according to the latest report of the petroleum ministry, will be supported by a crude oil pipeline which is being implemented by Oil India at a cost of Rs 30 crore. The marketing terminal would be implemented by NRL itself at a cost of Rs 225 crore.

INSIGHT

Margins may be squeezed

As has been the case with grassroot refineries like Mangalore Refinery and Petrochemicals and Reliance Petroleum, Numaligarh Refinery is also tapping the market at par. The products of the refinery will be marketed by BPCL. In other words it is at present a sole refiner, which will be enjoying a very low discounting. Cochin Refineries and Madras Refineries, which are also stand-alonerefineries, have price-earning ratios of 5 and 4 respectively.

Till the refining sector is opened up, there is little scope for appreciation of the stock. Further, with a substantial volume of products linked to international prices, which are currently depressed, margins of the refinery could be squeezed.