Aban stock sinks 19% after oil rig disaster

Bears attacked the Aban Offshore stock with a vengeance on Friday, dragging it down by 18.5% to Rs 828.35. The company’s biggest money spinning rig, Pearl, located off the Venezuelan cost, sank on Thursday. Traders, bearish on the stock, have been maintaining for a while that it was overvalued, as the market seemed to be ignoring the massive debt in the company’s balance sheet. The more adventurous among the bears had tried making money by short-selling the futures some time ago. But every time they were thwarted by bull operators backed by “friendly circles”, and were forced to square up their positions at a loss. But this time around, bulls are fighting with their backs to the wall.

Quite a few broking firms have downgraded their ratings on Aban to “sell”, saying the company’s cash flows have been severely affected by the loss of the rig, and it will struggle to pay the full interest on their debt. Even if the company decides to bridge the shortfall by selling equity, prospective investors would be unwilling to pay a premium. This and the resultant equity could provide further ammunition to the bears. Aban May futures closed at a discount of Rs 2.45 to the cash market price, with open interest rising 27% to 40 lakh shares.

Contributed by Santosh Nair.