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| Bulls chase oil marketing firms after Oil India road show |
| Palak Shah / Mumbai Sep 08, 2009, 00:00 IST |
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The shares of oil marketing companies (OMCs) have gained 10-20 per cent in the past one week on the back of buoyancy in the sector created by the initial public offer (IPO) of state-owned Oil India Ltd (OIL).
Top gainers in the sector since August 28 — when the OIL management was conducting road shows across the world to sell the IPO — include state-run Hindustan Petroleum Corporation Ltd (up 20.6 per cent), Bharat Petroleum Corporation Ltd (up 19.59 per cent) and Indian Oil Corporation (up 16.49 per cent).
Market analysts said the OIL IPO had again drawn the attention of overseas investors towards the oil and gas sector, which had received negative publicity due to the fight between the Ambani brothers over sharing gas from the Reliance Industries Ltd’s (RIL’s) K-G basin block.
“The OIL IPO has drawn the focus of overseas investors towards the oil and gas sector in the country. Ever since the OIL management started the road shows, most large foreign institutional investors (FIIs) investing in the country have shown a keen interest in oil marketing companies. Enquiries from large instituitions about oil marketing companies have increased recently,” said Deepak Sawhney, head of research at Mumbai-based Networth Stock Broking.
Sawhney says the interest of FIIs in domestic OMCs increased as the OIL road show highlighted the potential of these companies.
“OMCs’ stock are attractive as they will not have to bear any burden even if crude oil rises above $75. The burden would be passed to upstream companies. Also, the subsidy on cooking gas and kerosene would be borne by the government. Also, the fact that these companies will make good returns from their retail plans was highlighted during the road show,” said Sawhney.
According to Managing Director of KR Choksey Shares and Securities, Deven Choksey, the OIL road show had a positive impact. “During the road show, it was heard that government was likely to systematically bring down the subsidy burden on OMCs from around 31 per cent at present to 11 per cent in the near future. If this is true, stocks of public sector OMCs were available cheap,” said Choksey.
Apart from public sector OMCs, the shares of other oil companies that have witnessed a spike include Chennai Petro, Gulf Oil Corporation, MRPL and Essar Oil. The share price of Reliance Industries has come down 3.33 per cent during the period. Sensex was up 0.59 per cent during this duration while the BSE Oil and Gas index, in which RIL has the highest weighte of 54.46 per cent, was down 0.14 percent.
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