Shares of Bharat Petroleum Corporation Limited (BPCL) declined 5 per cent on the BSE in the intra-day trade on Tuesday as investors booked profit on report that at least three to four companies have submitted expressions of interest (EoIs) to the government for its stake sale in the company.
In the past one month, stock of the state-owned oil marketing company outperformed the market by surging 27 per cent as compared to a 10 per cent gain in the S&P BSE Sensex till Saturday, November 14.
According to a Business Standard report, neither Reliance Industries nor its partner Saudi Aramco put in a bid to pick the government’s stake. Russian state-owned Rosneft, which part owns Nayara Energy, the promoter of erstwhile Essar Oil refinery at Vadinar, is also believed to have kept out of the race, the report suggested.
The sale is crucial for the government in order to meet its disinvestment target of Rs 2.1 trillion for the current fiscal year. The government has not revealed the number of bidders. Union Finance Minister Nirmala Sitharaman tweeted that strategic divestment of BPCL has progressed to the second stage after multiple expressions of interest have been received, added report.
“BPCL offers huge value unlock opportunity to potential acquirer, which is not captured in current earnings, such as potential reduction in crude sourcing cost at least by USD 1/bbl for refining, higher flexibility on refining product slate, freedom to target retail marketing to focus more on high margin & high demand market, and liberty on retail pricing,” analysts at Elara Capital said in company update.
With private investors picking stake, more focus could be on high demand market & differential pricing, which could improve BPCL’s gasoline and diesel margin by Rs 0.8/lit or Rs 3,000 crore annualized EBITDA. Similarly, BPCL could minimize output of low-margin products like LPG and increase output of high margin gasoline and diesel, the brokerage firm said.
At 11:35 am, BPCL was trading 4 per cent lower at Rs 398 on the BSE, as compared to a 0.30 per cent rise in the S&P BSE Sensex. Trading volumes on the counter jumped 1.5 times with a combined 15.2 million shares changing hands on the NSE and BSE till the time of writing of this report.
