HPCL proved a strong gainer last week despite a weak market as the government invited bids for a stake in the company.

In the four trading sessions between 7 and 14 February 2003, the scrip of the state-run oil refining company climbed 3.65% to Rs 309.60. HPCL has witnessed a sustained rise of late as divestment euphoria gathered momentum. In the four months between 1 October 2002 and 14 February 2003, the scrip has jumped 86% from Rs 166.50.

The gains garnered by HPCL set off a rise in market capitalisation of the refinery sector as well. For the week, the sector comprising eight companies added Rs 430.75 crore (Rs 4.3 billion) or 1.14% to Rs 37,905.18 crore (Rs 379.05 billion) in m-cap. Of which, HPCL accounted for Rs 369.87 crore (Rs 3.69 billion) or an 85.9% rise .

Selective buying in the scrip was purely on the government initiative of inviting bids for 34.01% stake in the state-run oil refiner. This generated hope that the government reforms programme may catch pace.

The invitation of EoIs will precede the presentation by merchant bankers, aspiring to be appointed as HPCL advisors, which is scheduled for 17 and 18 February 2003. As per reports the government has already invited 17 investment bankers to make presentation for the divestment of HPCL.

JM Morgan Stanley, DSP Merrill Lynch, Salomon Smith Barney, Kotak Mahindra, JP Morgan, UBS Warburg, ANZ Grindlays, Deutsche Bank, ABN Amro, Ernst & Young, KPMG, Deloitte, Lazard India, Ambit Finance, Rabo Finance and SBI Capital Markets were reported to have submitted bids to become advisors for divestment in HPCL. Each of them have been allotted a half-hour slot to make their presentations.

The investment bankers will make their presentations to the inter-ministerial group comprising members of the divestment committee, ministry of finance and the ministry of petroleum & gas.

According to market talk, the strategic divestment in HPCL is expected to fetch the government at least Rs 8,000 crore (Rs 80 billion).

There is talk that the reserve price for HPCL is likely to be Rs 600-700 per share.

Earlier in January 2003, the government had given a green signal for divestment in HPCL (as well as the modus operandi for divestment). According to the Centre, 34.01% of HPCL's equity (government-held) would be sold to a strategic partner and 5% to the company's employees. The government will retain 12%. Currently, the government holding in HPCL is 51.01%.

On 30 January 2003, HPCL unveiled third quarter ended 31 December 2002 results - a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 3.3 billion) compared to Rs 60.81 crore in the corresponding period of the previous year. Net sales jumped 28% to Rs 14,210.23 crore (Rs 142.1 billion) from Rs 11,1156.38 crore (Rs 1111.56 billion) in DQ 2001.

HPCL's board of directors has also recommended an interim dividend of 20% (ie Rs 2 per share) for the financial year 2002-03. The company attributed the solid performance to buoyant international prices coupled with improved refining and marketing margins.

HPCL has about 4,600 retail outlets and a 20% market share in retailing petroleum products.

BSE Code: 500104