After the government announcement to divest its entire stake in the company, the BPCL share price has shown a muted response to the same. After the opening of the market on Thursday, BPCL’s share price has declined by 2.74 percent to Rs. 529. It is believed that the key reason behind the decline is the anticipation of a lower valuation for the company’s Numaligarh Refinery.
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Reportedly, the BPCL share price has witnessed an over 70 percent rise since August 23. In less than three months’ time, the share of the company has touched a high of Rs. 549 from a low of Rs. 308 in anticipation of a disinvestment announcement from the government. Therefore, considering the disinvestment decision, BPCL is fully valued in the near term at the current price.
According to the analysts, BPCL’s overall valuation could be impacted as the company’s Numaligarh Refinery (NRL) would be carved out, to be taken over by another PSU.
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Finance Minister Nirmala Sitharaman on Wednesday said that the government would sell its entire 53.29 percent stake in BPCL, but the sale would exclude BPCL’s NRL, in which the company holds 61.65 percent stake.
According to the brokerage house Nirmal Bang, “Our replacement cost-based value of Rs 583 for BPCL includes Rs 62 per share or 10.6 percent. Our Base case PE (price to earnings) based target price of Rs 512 includes a similar value for NRL. The stake sale, excluding NRL, will only impact government receipts.”
Nirmal Bang further added, “For BPCL investors, the stake will still offer value based on how it is valued in the proposed transfer to another PSU, most likely IOC or OIL India, which holds 26 percent stake in NRL.”
