BPCL, SCI, Concor rally up to 14% as govt clears divestment proposal

Shares of Bharat Petroleum Corporation (BPCL), Shipping Corporation of India (SCI) and Container Corporation of India (Concor) rallied up to 14 per cent on the BSE on Tuesday after group of secretaries cleared disinvestment proposal of these public sector companies.

Individually, SCI surged the most, adding 14 per cent, to trade at Rs 49.30 on the BSE in early morning trade. BPCL, on the other hand, soared 9 per cent to hit a new high of Rs 512 at the bourses. Concor, too, hit a 52-week high of Rs 644, up 6 per cent in intra-day so far.

In the past month, SCI (zoomed 77 per cent), BPCL (up 44 per cent) and Concor (up 27 per cent) have outperformed the benchmark S&P BSE Sensex, which gained 4 per cent during the same period.

While the government wants to sell its entire stake in BPCL and SCI, it intends to offload 30 per cent, out of the 54.8 per cent it holds in Concor. 

A Business Standard report, citing sources, said that the government could consider two options for BPCL— either to sell it to a private party or to Indian Oil Corporation. The structure will be decided at the time of preparing the note. READ REPORT HERE

However, disinvestment in BPCL would require a change in the law because it was formed after Burmah Shell was nationalised in 1976 under the Companies Act, it added.  

“BPCL is an integrated refining and marketing company with an increasing focus on Petchem. Arguably India’s Oil Marketing Companies should trade at a much higher multiple (7-8x) given the secular nature of the marketing side of the business (steady growth, strong entry barriers), but worries on marketing freedom and price regulation have kept multiples in check. In our view entry of global players should reduce the risk of price control remerging in the sector,” analysts at JP Morgan said in company report dated September 13th.

"Strategic disinvestment, if through privatisation of BPCL, provides ready access to India's fast growing petroleum market to the buyer. It may also result in capital efficiency, better project execution, and efficient/independent decision making in operations and procurement... Lower government intervention and higher liquidity would also encourage better valuations for the stock," analysts at Motilal Oswal Financial Services wrote in their latest report, who value BPCL at Rs 495 using 1.9x FY21.