BPCL Shares Drop to 52-Week Low Due to Divestment Delay

Feb 23, 2022, 13:23 IST

In his report, Motilal Oswal said, "Even if OMCs are not made to share any under-recovery, the continued pricing intervention would make it utterly difficult to divest the government's stake in BPCL."

As a result, BPCL falls to a 52-week low as a result of a possible delay in divestment and rising oil prices.

BPCL Shares Drop: On Tuesday's intra-day trade on the BSE, shares of Bharat Petroleum Corporation (BPCL) hit a 52-week low of Rs 356, down 3.5 per cent on fears about a delay in the disposal. The state-owned oil marketing company's (OMC) stock went below the historical low of Rs 356.80, set on February 15, 2022. Furthermore, the stock has fallen by 29% from hitting a 52-week high of Rs. 503 on September 14, 2021.

The stock has dropped 10% so far in February on news that the privatisation of India's second-largest oil refiner may have been postponed until the following fiscal year because no bidders visited the firm's premises in the previous quarter.

According to a source, BPCL Director-Finance V R K Gupta remarked on a conference call with analysts that "no major events happened in terms of bidder visits to our company premises during the third quarter (October-December 2021) and the status quo is the same."

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Three expressions of interest (EoIs) have been received for the government's whole 52.98 per cent ownership in BPCL, including one from billionaire Anil Agarwal's Vedanta Group.

Motilal Oswal Financial Services has downgraded BPCL to neutral. The brokerage firm stated in an oil and gas sector update that "even if OMCs are not required to share any under-recovery, the government's interest in BPCL will be completely tough to divest."

The period FY15–FY18 is often regarded as the pinnacle of deregulation, with no price intervention and low oil prices. During that time, IOCL, BPCL, and HPCL traded at an average one-year forward PBV of 1.2x, 2.2x, and 1.6x, respectively. However, between FY12 and FY15, the corresponding OMCs traded at an average one-year forward PBV of 0.9x/1.4x/0.8x.

"We, nonetheless, note that IOCL/BPCL/HPCL have been currently trading at an average one-year forward PBV of 0.8x/1.5x/1.0x, respectively, impacted by constant interventions either through excise duty revisions or during elections in key states amid rising oil prices, poor refining margin environment, and inadequate consumption of petroleum products due to the pandemic," the brokerage firm said.

BPCL was down 3% at Rs 359 at 11:02 a.m., compared to a 1.3 per cent drop in the S&P BSE Sensex.HPCL was down 1% at Rs 290, after sliding 9% to Rs 267.50 in intraday trade. On the BSE, Indian Oil Corporation (IOC) was down 1% at Rs 118.

Meanwhile, oil rose to a seven-year high on Tuesday, putting Europe's eastern border on the verge of war after Russian President Vladimir Putin ordered troops into breakaway regions of eastern Ukraine.

However, because OMCs are not adjusting retail gasoline and diesel prices, the street is concerned about the impact on their margins in the coming quarters.