HPCL swells as initial bids invited

HPCL got a veritable boost in morning trades on Monday after the Centre set the deadline for receiving expressions of interest for a stake in the company at 17 March 2003.

The scrip of the oil refining and marketing company rose 1.09% to Rs 295.85 by 10:05 IST, as a result. It recorded volumes of 71,265 shares on BSE by then. The news of invitation for initial bids has perked up the scrip from a recent downward trend. In the 13 sessions between 18 February and 7 March 2003, it lost 11.2% to Rs 292.65 from Rs 329.60.

The Centre has invited expressions of interest from potential strategic investors in HPCL by 17 March 2003. A 34.01% stake in India's second largest public sector refining and marketing company is being put on the block.

Dealers say, though an initial spurt has been witnessed in HPCL on the news, the scrip will not, most likely, hold on to higher levels as geopolitical tensions are weighing the market down.

Last week, the core group of secretaries on divestment cleared the appointment of HSBC as global advisor in the divestment of HPCL. HSBC was selected from among 17 merchant bankers that had made their presentations before the divestment ministry in February 2003.

Among the potential bidders for HPCL are believed to be Reliance Industries, Royal Dutch Shell, Petronas of Malaysia and Kuwait Petroleum Corporation . According to market talk, the strategic divestment in HPCL is expected to fetch the government at least Rs 8,000 crore (Rs 80 billion). There is talk that the reserve price for HPCL will be around Rs 600-700 per share.

In January 2003, the government had given the green signal for the divestment of HPCL (as well as the modus operandi for divestment). According to the Centre, 34.01% of HPCL's equity (government-held) would be sold to a strategic partner and 5% to the company's employees. The government would retain 12%. Currently, the government holding in HPCL is 51.01%.

On 30 January 2003, HPCL unveiled third quarter ended 31 December 2002 results - a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 3.3 billion) compared to Rs 60.81 crore in the corresponding period of the previous year. Net sales jumped 28% to Rs 14,210.23 crore (Rs 142.1 billion) from Rs 11,115.60 crore (Rs 111.15 billion) in DQ 2001.

HPCL's board of directors has also recommended an interim dividend of 20% (ie Rs 2 per share) for the financial year 2002-03. The company attributed the solid performance to buoyant international prices coupled with improved refining and marketing margins.

BSE code: 500104