HPCL surges on divestment move

HPCL found favour with FIIs on Tuesday as the market expects the divestment of the company to take place soon

The scrip of the oil refiner and retailer emerged higher in a subdued market, by 1.5% to Rs 311.90 (by 10:50 IST). It recorded volumes of over 350,000 shares on BSE. In five sessions to date, the scrip has risen 7.3% from Rs 290.55 on 1 April 2003.

Foreign institutional investors are believed to be buying on the counter since yesterday as the company moves towards imminent divestment. Also a huge dividend pay-out is expected from the company for FY 2002-03. Similar hopes are pushing up other PSU stocks as well, like BPCL (up 1.33% to Rs 237.05), ITI (up 1.47% to Rs 17.25), Bharat Electronics (up 2.6% to Rs 207.50) and Bharat Earthmovers (up 2.68% to Rs 70.90).

A major HPCL divestment step may be taken up on Thursday when the inter-ministerial group meets to shortlist the names of bidders for the state-run oil refiner.

Reports have suggested that aggressive bidding has taken place for a strategic stake in the company. A host of foreign companies like the US-based ChevronTexaco, Malaysia's Petronas, Ango-Dutch oil major Shell, British Oil major BP and Saudi Aramco are reported to have put in initial bids. Domestic oil and gas and petrochemicals major, Reliance Industries, is also reported to have put in a bid and so has Ruia group oil company Essar Oil.

These bidders see HPCL's strong retailing network as quite attractive. HPCL has about 4,600 retail outlets and a 20% market share in retailing petroleum products. The government announced its plans to privatise HPCL through a strategic sale for which it has already appointed HSBC as global advisor.

In January 2003, the government gave the green signal for divestment in HPCL. As per its plans, 34.01% of HPCL's equity would be sold to a strategic partner and 5% to the company's employees. The government will retain 12% holding in the company. Currently, its stake in HPCL is at 51.01%.

For the third quarter ended 31 December 2002, HPCL registered a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 3.3 billion) on a 28% jump in net sales to Rs 14,210.23 crore (Rs 142.1 billion). The company has recommended an interim dividend of 20% (i.e. Rs 2 per share) for the financial year 2002-03.

BSE code: 500104