HPCL was all fueled up in morning trades on Monday, despite witnessing volatility, on news that Reliance Industries is likely to bid for the government's 34% stake in the company.

The news took centre stage on the counter on BSE, propelling the scrip upward by 1.4% to Rs 313.95 in just one hour of trading. Volatility marked the counter on Monday, as it had over the last few sessions, what with the scrip coming off the day's high of Rs 316.40.

HPCL shares have surged sharply from a late September 2002 low and currently trade near a 11-month high (Rs 314.95 at close on 11 February 2003). But the scrip has proved quite volatile of late.

Latest reports suggest that Reliance Industries will bid for a stake in HPCL. On 7 February 2003, the government had invited initial bids for its 34% stake in HPCL (by way of a strategic sale). Bidders will have to submit initial bids by 17 March 2003 and the government has set a net worth criteria of Rs 2,500 crore (Rs 25 billion) for eligibility.

Besides RIL, foreign companies like Shell are expected to submit bids for the stake. However, PSUs will not be allowed to bid for HPCL. This is contrary to the government position during the divestment of IBP last year. In fact, a state-run oil PSU, Indian Oil Corporation, won the bid for IBP.

As per market talk, the government has set Rs 395 as the reserve price for HPCL (which is the minimum price below which the divestment will not take place). Currently, the government holding in HPCL is 51.01%.

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

However, on the negative side, there is the threat that oil sector employees will block the divestment of HPCL and peer BPCL. Last week, divestment minister Arun Shourie said that any strike by oil sector workers to oppose the stake sale in cash-rich oil firms HPCL and BPCL may hurt the valuation of these companies and also reduce the benefit to employees.

For Q3 ended 31 December 2002, HPCL posted 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 by 28% to Rs 14,210.23 crore (Rs 142.1 billion) from Rs 11,1156.38 crore (Rs 1111.56 billion) in DQ 2001. The company attributed the solid performance to buoyant international oil prices coupled with improved refining and marketing margins.

BSE Code: 500104