The Telegraph
Since 1st March, 1999
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Guessing game on Hind Petro share valuation

Mumbai, Jan. 27: The government’s stake in Hindustan Petroleum Corporation (HPCL) could fetch a tentative price of Rs 500-550 per share. However, analysts believe that factors like the Bhatinda refinery would cast its spell on the bid price.

A day after the Cabinet Committee on Disinvestment (CCD) meet, which cleared a strategic offload of 34 per cent in HPCL and a public issue of 35.2 per cent government equity in Bharat Petroleum Corporation (BPCL), the mood was circumspect. Based on current estimates, the government hopes to garner over Rs 8,000 crore from the divestment of HPCL which accounts for over 20 per cent of the country's refining capacity.

Analysts and market experts aver that though notable bidders like Reliance Industries, Shell, Exxon Mobil, Kuwait Petroleum, Chevron, TotalFina may show interest in HPCL, certain details in the bid document would have a significant bearing on the bid price.

“A crucial issue is whether the Bhatinda refinery will be a part of the divestment process. If it forms a part, then we could see valuations getting affected. If not, the bidders could quote a higher price,” said Amit Mahajan, oil analyst at Khandwala Securities.

HPCL has already spent over Rs 300 crore for the six million-tonne Bhatinda project, estimated to cost around Rs 9,000 crore. The company has also acquired 2,000 acres of land and has completed a large part of the tendering for the project. Analysts note that the present industrial conditions governing refineries (abundant capacities) and the location of the project (it is in a land-locked region) are the principal reasons that make it unattractive.

The ministry of petroleum and natural gas has, however, justified the Bhatinda refinery, citing a demand-supply gap of close to six million tonnes in North India during the Tenth Plan.

Though divestment minister Arun Shourie has mentioned that if the strategic partners are not interested, the government will find other means of completing the project, it is largely felt that both Indian Oil Corporation and the Oil and Natural Gas Corporation (ONGC) may be loath to such a move.

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