BPCL zooms 34% in September, set to post sharpest monthly rally in 11 years

Shares of Bharat Petroleum Corporation Limited (BPCL) were trading higher for the fifth straight day, up 3 per cent at Rs 477 on the BSE on Thursday, on reports that the government is considering selling its stake to a global oil company. It was trading at its highest level since February 2018.

With this,the stock of the public sector oil behemoth is set to post its sharpest monthly rally in 11 years. Thus far in September, the share price of BPCL has zoomed 34 per cent, as compared to a 5 per cent rise in the S&P BSE Sensex. Previously, the stock logged a rally of 47 per cent during July 2008.

Centre is considering a plan to sell the nation’s second-largest state refiner and fuel retailer to a global oil company as it explores options to give up its controlling stake in BPCL, Bloomberg had reported on September 13 quoting people with knowledge of the matter. READ HERE

Business Standard on September 2, reported that the Centre is planning to offload its entire stake worth a little more than Rs 40,000 crore in BPCL, most likely to fellow state-owned oil-marketing company Indian Oil Corporation (IOCL), a deal that will go a long way in the Narendra Modi government meeting its highest-ever disinvestment target of Rs 1.05 trillion. A direct privatisation of BPCL would require Parliament approval.

Analysts at JP Morgan believe that a strategic sale to a private/global company is a low probability event for now, but given the trend in the Government’s fiscal situation (weakening tax collections, pressure not to cut expenditure), and the already large divestment target, policymakers may need to consider the privatisation option of large state-owned enterprises or SoE’s at some point.

“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,” the brokerage firm said in report dated September 13, 2019.

Meanwhile, Hindustan Petroleum Corporation (HPCL) and Indian Oil Corporation (IOCL) were up 5 per cent each, at Rs 300 and Rs 149, respectively on the BSE. In comparison, the S&P BSE Sensex was up 1.2 per cent at 39,071 points at 10:28 am.