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'Setback to BPCL share price only temporary'

Fakir Chand in Bangalore

The postponement of the divestment of the government's majority stake in BPCL and HPCL by three months has sharply impacted the share prices of the two oil refiners.

The Bharat Petroleum Corporation Ltd stock lost Rs 51.90, sliding from Rs 254 per share to Rs 202.10, or 20.43 per cent. The Hindustan Petroleum Corporation Ltd scrip slipped by a whopping Rs 70.60 to Rs 200.60 from Rs 271.20: that was a loss of 26.03 per cent in just one trading day.

A top BPCL official told rediff.com in Bangalore on Monday that the delay would have a big impact on the stock price of the company, but it would only be a temporary setback. The scrip would bounce back by the time the government finally divests its controlling stake in the company.

"Ever since the government decided to hand over the reins of the BPCL to a strategic investor, its stock price had been not only moving upwards, but also out-performed other public sector undertakings' share movement," the official claimed.

Though around 33 per cent of the company's equity is already in the hands of the private or institutional holders, the government's stake of 66 per cent will be reduced up to 26 per cent, with the majority or controlling stake going to a strategic investor, and the remaining 1 per cent being allotted to BPCL employees.

"Variation in our stock price is bound to occur not only because of the delay in the company's divestment, but also due to other factors such as market sentiment and impact of global oil prices owing to uncertainty. This is only a temporary blip. Being a blue chip scrip, its share price will bounce back once the divestment process picks up momentum," official asserted.

The official, however, declined to comment whether the company's board had any say in the divestment process and whether it preferred diluting the majority stake to a strategic investor or to the public directly.

"As the company is owned by the government of India, it is the prerogative of the Union petroleum ministry and the divestment ministry to decide which is the best or preferred route for privatising it," the official stated.

The stock price of BPCL has been fluctuating between Rs 250-270 during the recent trading sessions in anticipation of the strategic divestment.

Ranking 13th on the BSE market capitalization, its market cap on the last trading session on September 6 was around Rs 76.20 billion (Rs 7,620 crore) against a high of Rs 92.29 billion (Rs 9, 229 crore) a month ago.

Asked whether the company's brand name (BPCL) would undergo a change after divestment, the official said it was too early and hypothetical to foresee what the new management would decide, as BPCL had built a world class brand during its operations over the decades.

Meanwhile, the Rs 46,000 crore (Rs 460 billion) company is drawing up ambitious plans to enter the LPG (liquefied petroleum gas) and CNG (compressed natural gas) market in a big way for catering to the new automobiles and commercial transport vehicles.

"We are planning to open about 100 outlets for supplying LPG to passenger cars with conversion kits or fuel tanks as we expect a substantial growth in this segment in view of the increasing pressure on users to conform to the revised emission norms," BPCL finance director Ashok Sinha declared.

Launching the new generation high-performance petrol 'Speed' in Bangalore, Sinha said BPCL would be offering duel fuels from its retail outlets as demand for petrol and diesel would continue to exist even in the face of increasing migration to LPG or CNG fuel by automobiles as well as transport vehicles.

Commanding a market share of about 30 per cent of the petroleum products in the country, next to only Indian Oil Company, BPCL is targeting a growth rate of 5-8 per cent during the current fiscal year to cross a sales turnover of Rs 50,000 crore (Rs 500 billion).

BPCL has tied up with the US-based Chevron Oronite Company LLC to produce Speed as a blend of petrol and multi-functional additives, and complies with the Environment Protection Agency of the US.

The Supreme Court has reversed the cancellation of petroleum and LPG dealerships ordered by the government, BPCL is planning to allot another 100-200 retail outlets to dealers during the current year through the normal route transparently, as part of its market expansion in the country.

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