HPCL, BPCL surge up to 13%; RIL slumps 8% as Brent Crude hits 20-yr low

Oil marketing companies, and paint stocks including Hindustan petroleum, and Berger Paints were trading higher in an otherwise weak market after oil prices crashed to a 20-year low of around $33 per barrel-mark. Brent Crude Futures tanked on Monday after top exporter Saudi Arabia launched a price war in response to a failure by leading producers to strike a deal to support energy markets.

At 9:38 am, Brent Crude Futures were at $32.27/bbl, down 13 cents or 28.72 per cent, US WTI, on the other hand, was at $28.45/bbl-mark, down 12.83 cents or 31 per cent.

At the bourses, OMC including Hindustan Petroleum Corporation Ltd (HPCL) surged 12.8 per cent to Rs 226.6 apiece on the BSE, while Bharat Petroleum Corp Ltd (BPCL) gained 12.7 per cent to Rs 454.10. Indian Oil Corp (IOC), meanwhile, added 4.4 per cent to Rs 105.25 on the BSE in the early deals. 

Saudi Arabia launched an all-out oil war on Sunday with the biggest cut in its prices in the last 20 years, Bloomberg News reported, after a failure by cartel OPEC and its allies to clinch a deal to cut production.

A meeting of main producers was expected to agree to deeper cuts to counter the impact of the new coronavirus -- but Moscow refused to tighten supply.

For BPCL, other than the crash in brent crude prices, the government's decision to invite bids for a majority stake in the company boosted buying sentiment. On Saturday, more than three months after the Union Cabinet approved the strategic divestment, the government invited bids from private companies with a net worth of over $10 billion (Rs 74,000 crore). 

"Based on the current market capitalisation of Rs 87,388 crore, the government stake of 52.98 per cent in BPCL is valued at around Rs 46,300 crore. This sale is key to meeting the government’s disinvestment target of Rs 2.1 trillion in the financial year 2020-21," the government said in a statement.

Further, the Department of Investment and Public Asset Management (Dipam) made it clear that none of the public sector undertakings will be allowed to participate in the proposed stake sale, the bidding for which will close of May 2, 2020. READ MORE

"A stake in any of the OMCs will provide a buyer ready access to the third largest and one of the fastest growing petroleum markets globally. OMCs together account for 92 per cent/91 per cent/90 per cent of petroleum product pipelines/marketing depots/fuel retail outlets, with BPCL’s share at 18 per cent/25 per cent/23 per cent... Thus, BPCL with nearly 25 per cent market share in Indian petrol and diesel sales provides a lucrative entry point for a prospective buyer to capture the Indian growth story," analysts at Motilal Oswal Financial Services Ltd (MOFSL) wrote in a report. The brokerage maintains 'Neutral' call on the stock and value it at 1.9x (10 per cent discount to FY15-18) FY22 PBV to arrive at a target price of Rs 520.



On the downside, Reliance Industries plunged 7.8 per cent to Rs 1,170.25 on the BSE after shares of Saudi state oil company Aramco slumped below their initial public offering (IPO) price on Sunday for the first time since they began trading in December, after OPEC's pact with Russia to restrict oil supplies fell apart.

In August last year, RIL chairman Mukesh Ambani had announced his company would sell a 20 per cent stake in the oil-to-chemical business to the Saudi national oil company. Also, a 49 per cent interest in fuel retailing business was sold to UK's BP plc for Rs 7,000 crore.

That apart, paint stocks such as Asian Paints rose 2 per cent to Rs 1,915.9 on the BSE, while Kansai Nerolac Paints gained 1.4 per cent to Rs 488. Berger Paints, meanwhile, advanced 2.6 per cent to Rs 549.1 per share.

"With ongoing improvements in margins, we expect the company's earnings to grow at a healthy 23.0 per cent CAGR over FY20-22. Hence, we upgrade our rating on the stock to a HOLD with a roll forward target price of Rs. 623 based on 55x FY22E adj. EPS," noted analysts at Geojit Financial Services.

Tyre-stocks, however, were trading lower as outbreak of coronavirus dented car sales across global markets.

MRF slipped 2 per cent to Rs 65,205 in the early deals, while Apollo Tyres skid 4 per cent to Rs 129.65. Ceat, too, was trading 2 per cent lower in the BSE. 

Vehicle sales declined 6.7 per cent to 2,50,698 units in February, as compared to 2,68,843 units sold last year, according to industry body SIAM.

India’s largest carmaker, Maruti Suzuki reported a 1.6 per cent decline to 136,849 units last month, as against 139,100 sold units in February 2019. While the second largest carmaker Hyundai India posted a higher decline of 7.2 per cent at 40,010 units, compared to 43,110 units sold in the same month last year.

Further, the auto-sales in China, world' biggest consumer market, dropped by a massive 92 per cent in the first 16 days of February, when compared to the same duration last year, Reuters reported.

According to China Passenger Car Association's (CPCA) data, the first 16 days of February resulted in sales of only 4,909 units, which is a stark contrast to the 59,930 units sold in China during the same time in 2019