The Telegraph
Since 1st March, 1999
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Selloff hopes spark HPCL rally

Mumbai, May 8: Rumours that the divestment process in Hindustan Petroleum is picking up sent the stock soaring on the Bombay Stock Exchange (BSE) today. The HPCL share bucked the market trend to post gains when other pivotals were busy shedding value. The scrip gained Rs 9.10 to close at Rs 304.05, a gain of 3.08 per cent over the previous close of 294.95. The BSE sensex shed 19.14 points to close at 2961.60 points.

Reports say the company is setting up data centres to allow prospective bidders to conduct due diligence. HPCL sources say merchant bankers are already visiting their headquarters.

But most marketmen are not enthused by this rally. “Today’s price movement in HPCL was unwarranted. The discussion in Parliament on the divestment of HPCL does not clarify anything on privatisation,” said Arun Kejriwal of Kejriwal Research & Investment Services.

Brokers agree that the divestment story has resurfaced and many PSU stocks have gained recently. However, they are not very sure how long the rally will be sustained.

This belief partly stems from a parliamentary committee move asking the government to get the approval of Parliament before privatising Hindustan Petroleum and Bharat Petroleum as the two were nationalised through an Act of Parliament.

Eight companies, including Royal/Dutch Shell, BP Amoco, Saudi Aramco, Petronas of Malaysia, Reliance Industries and the Essar group, are in the fray to acquire the government’s 34.01 per cent stake in HPCL.

Marketmen are also apprehensive about the public interest litigation (PIL) initiated by Shanti Bhushan in the Supreme Court.

Unlike Nalco’s divestment which affects Orissa directly, HPCL selloff does not affect any state directly, a fund manager argued. The only uncertainty is about the PIL before the Supreme Court, he added.

Brokers expect the share to react tomorrow in the light of the developments in Parliament today.

For foreign oil majors like Shell and BP Amoco, privatisation of HPCL means the sole opportunity to get a toehold in the highly profitable retail sector.

HPCL’s disinvestment is also significant in another aspect. The government has forbidden PSU’s like ONGC and Indian Oil to bid for HPCL.

Last year, IOC had made an aggressive bid for IBP that saw the private bidders failing to match the price quoted by Indian Oil for the oil retailing company.

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