Tide Water Oil was bound to flow on Monday on reports that the core group of secretaries on disinvestment had discussed and cleared the draft transaction document for the lubricants major.

In fact, by 10:50 IST, the Tide Water Oil scrip was at its 10% upper circuit at Rs 1,150.15 on BSE. By then, only 110 shares were traded on the counter.

The current fortunes are in direct contrast to the scrip's performance of late. Between 4 March and 4 April 2003, TWO lost 24.8% to Rs 1,390 from Rs 1,045.60 on concerns over spiraling crude oil prices due to the US-Iraq war.

As per reports Thursday, the core group of secretaries on divestment discussed and cleared the draft transaction of TWO. With this clearance, the documents will be forwarded to the Cabinet Committee on Divestment for the latter's final approval.

Earlier, the Foreign Investment Promotion Board had also cleared the decks for foreign direct investment in the lubricants business, by specifying that 100% FDI has been allowed in the lubricants sector.

Andrew Yule has already invited bids for offloading the combined 41.98% stake in TWO. There were reports in the recent past that a number of Indian and foreign companies were in the race to acquire equity stake in the lubricants firm. Among the foreign companies that have been short-listed as eligible bidders for TWO are Caltex and Shell. Domestic companies in the fray are IBP, HPCL and BPCL.

TWO is engaged in the manufacture and marketing of branded automotive and industrial lubricants and grease. The company markets Veedol and Mitsubishi brands of lubricants in India. TWO has been a pioneer in automobile and industrial lubricants. In 1993-94, it entered into a technology transfer tie-up to manufacture and market Mitsubishi products in India. TWO has entered into arrangements with companies in the automotive sector as well as original equipment manufacturers to market its products. The good brand equity of TWO's products has helped it in achieving brand loyalty in relevant market segments even in a fiercely competitive market. The efforts of the accredited R&D centres in Mumbai and Chennai have been successful in upgrading product formulations and launching new products.

For the third quarter ended 31 December 2002, TWO registered a marginal 2.9% rise in net profit to Rs 2.14 crore on a 2.75% increase in sales to Rs 43.34 crore.

The rise in crude oil prices and the consequent increase in prices of raw materials could result in a pressure on the margin of the company, however. Also, the general forecast for the economic growth being not too optimistic and the lube industry being highly competitive, the possibilities of a top line growth remain limited. But, as the company's improvement in profit margins has come more from internal efforts, the improvement in the same can be expected to sustain for the current year.

As on 31 December 2002, public and institutions held 17.5% and 14.5% in TWO respectively.