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Business News/ Companies / News/  Govt suspects attempt to deflate BPCL share price

Govt suspects attempt to deflate BPCL share price

The Centre is looking to raise around ₹90,000 cr from divesting its stake in the PSU

Bharat Petroleum Corp. Ltd is India’s second-largest fuel retailer with a 25.77% market share (Mint)Premium
Bharat Petroleum Corp. Ltd is India’s second-largest fuel retailer with a 25.77% market share (Mint)

The Centre suspects that Bharat Petroleum Corp. Ltd’s (BPCL’s) share price is being manipulated as it prepares to divest its controlling stake in the state-run firm, said two government officials.

The concerns over stock price manipulation of India’s second-largest fuel retailer have been discussed within the government, considering that its privatization is a key milestone in the Centre’s 2.1 trillion divestment target for 2020-21. “Someone is playing the market to keep BPCL’s share price down. This concern has been discussed within the government," one of the officials said, requesting anonymity.

The BPCL stock has underperformed benchmarks despite markets hitting new highs. However, stocks of some other state-run companies have also been underperforming the broader markets.

BPCL’s shares rose 13.10, or 3.18%, to 425 on Thursday, while the Sensex was at 49,584.16 points, up 0.19%. In the past one year, shares of BPCL lost 9.93% against a rise of 3.92% in the BSE Oil & Gas Index. However, RIL gained 29.44% while its peers, HPCL and IOCL lost 8.29% and 18.72% respectively.

The Centre is looking to raise around 90,000 crore from divesting its stake in BPCL—way above the valuation the stock is trading at. The Centre seeks to benchmark BPCL’s price to some of its publicly traded peers, Mint reported earlier. The Centre’s target price for its 52.98% stake in BPCL is also based on the value of the firm’s assets.

Vedanta Group and two American funds—Apollo Global and I Squared Capital—have reportedly submitted expressions of interest for BPCL. The department of investment and public asset management (Dipam) is managing BPCL’s privatization process, while Deloitte Touche Tohmatsu India is the transaction adviser.

Analysts said the steep rise in excise duty of transportation fuels may be a reason for the underperformance of BPCL’s stock. “I believe OMC (oil marketing companies) stocks, including BPCL, underperformed the Sensex due to weak global refining environment, but primarily due to a steep hike in excise duties of diesel and petrol during 2020," said Gagan Dixit, vice president, institutional equity research, Elara Capital.

“Higher excise duties on diesel and petrol pose a risk to the marketing margin of OMCs. If international crude prices rise to $60 per barrel, then diesel and petrol retail prices jump above 100 a litre and that could pressurize OMC margins. Consequently, dependence on the government will increase via expectation of relief through reduction in excise, and institutional investors don’t like that situation," Dixit added.

When contacted, a Deloitte spokesperson said in an email: “We are bound by confidentiality obligations and are unable to comment on client-specific matters."

An external spokesperson for Apollo Global refused to comment.

Spokespersons of the ministries of petroleum and natural gas, and finance, Dipam, Vedanta Group and I Squared Capital did not respond to email queries sent on late Monday night till press time.

When contacted over the phone on Tuesday, a Vedanta Resources spokesperson declined to comment.

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Published: 15 Jan 2021, 05:36 AM IST
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