BPCL hits 52-week low on likely delay in divestment, soaring oil prices

Even if OMCs are not made to share any under-recovery, the continued pricing intervention would make it utterly difficult to divest government's stake in BPCL, Motilal Oswal said in its report

Shares of Bharat Petroleum Corporation (BPCL) hit a 52-week low at Rs 356, down 3.5 per cent on the BSE in Tuesday's intra-day trade on concerns around delay in divestment. The stock of the state-owned oil marketing company (OMC) fell below its previous low of Rs 356.80 touched on February 15, 2022. Moreover, the stock has corrected 29 per cent from its 52-week high of Rs 503 hit on September 14, 2021.

Thus far in the month of February, the stock has slipped 10 per cent on reports that the privatisation of India's second-largest oil refiner may have been pushed back to the next fiscal year as no bidder visited the firm's premises in the last quarter.

During the third quarter (October-December 2021) "no major events happened in terms of bidder visits to our company premises and the status quo is same," BPCL Director-Finance V R K Gupta said at a conference call with analysts, according to a PTI report. CLICK HERE FOR FULL REPORT

The government is selling its entire 52.98 per cent stake in BPCL for which three expressions of interest (EoIs), including one from billionaire Anil Agarwal-led Vedanta Group, have been received.

Meanwhile, Motilal Oswal Financial Services has downgraded BPCL to neutral. "Even if OMCs are not made to share any under-recovery, the continued pricing intervention would make it utterly difficult to divest government's stake in BPCL," the brokerage firm said in a oil & gas sector update.

FY15-FY18 is widely regarded as the era of perfect deregulation, with absence of pricing intervention amid benign oil prices. IOCL/BPCL/HPCL traded at an average one-year forward PBV of 1.2x/2.2x/1.6x, respectively, during that period. However, the respective OMCs traded at an average one-year forward PBV of 0.9x/1.4x/0.8x during FY12-15.

"We, nonetheless, note that IOCL/BPCL/HPCL have been currently trading at average one-year forward PBV of 0.8x/1.5x/1.0x, respectively, impacted by constant interventions either through excise duty revisions, or during elections in key states amid rising oil prices, poor refining margin environment, and inadequate consumption of petroleum products due to the pandemic," the brokerage firm said.

At 11:02 am, BPCL traded 3 per cent lower at Rs 359, as compared to 1.3 per cent decline on the S&P BSE Sensex. Hindustan Petroleum Corporation (HPCL) was down 1 per cent at Rs 290, after falling 9 per cent to Rs 267.50 in intra-day trade. Indian Oil Corporation (IOC) too was down 1 per cent at Rs 118 on the BSE.

Separately, oil jumped to a seven-year high on Tuesday as Europe's eastern flank stood on the brink of war after Russian President Vladimir Putin ordered troops into breakaway regions of eastern Ukraine.

However, as OMCs are not changing retail prices of petrol and diesel, the Street is worried about the hit on their margins in quarters ahead.