Bharat Oman Refineries Ltd (BORL), an equal joint venture between state-owned Bharat Petroleum Corporation Ltd (BPCL) and Oman Oil Co., is set to raise about Rs.2400 crore ($600 million) by tapping the primary market as well as through a pre-IPO placement, to part finance a Rs.10,400 crore ($2.6 billion) refinery project at Bina, Madhya Pradesh.

We are coming to the market with a strong promoter backing and a project which is 50 percent complete and are confident that our's is a good offer which will be reasonably priced, said D.M. Naik Bengre, senior vice president (finance), BORL.

The refining margin cycle is good right now. So it makes sense for BORL to raise money from the public at this point of time, he said, brushing off apprehensions raised by some market analysts that the present market volatility would scare away potential investors.

The IPO is likely to hit the market around June-July of this year.

About 45 percent stake would be offloaded through the initial public offer (IPO) as well as the pre-IPO placement, a source said, adding the company has also filed the draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) for the proposed IPO.

The price band for the IPO would be set after determining the funds that would be raised through the pre-IPO placement, he said.

The funds for the 120,000 barrels per day (bpd) refinery at Bina, which is expected to commence operations by January 2010, would be raised through a mix of debt and equity in the ratio 1.6:1. About Rs.6400 crore would be raised through loans, Bengre said.

Post-IPO, Oman Oil, which is expected to sell a major share of its stake in the pre-IPO placement, will hold 5 percent while the Madhya Pradesh government will hold 2 percent stake in the venture. BPCL, whose board will invest Rs.1996 crore ($499 million) in the IPO, will hold 48 percent.

SBI Capital Markets, Citibank and ICICI Securities are among the lead managers of the issue.

India's booming economy has increased the nation's appetite for oil consumption and local oil producers are vying with one another to partner with overseas producers in tapping oil sources in emerging markets. The nation hopes to become a refining hub in Asia by 2012 by its refining capacity by 62 percent to 4.82 million bpd.

BPCL, with a market value of $3.7 billion, is one of the largest oil producers in India, running a 2,40,000 bpd refinery in Mumbai, Maharashtra and another 1,50,000 bpd refinery in Kochi, Kerala. Its subsidiary Numaligarh Refinery Ltd runs a 60,000 bpd refinery in north-east India.