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Wednesday, Dec 04, 2002

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Kochi Refineries, GAIL tumble on disinvestment doubts

Deeptha Rajkumar

KOCHI, Dec. 3

THE Disinvestment Minister, Mr Arun Shourie's comment on the progress of privatisation being dependent on the Prime Minister and the Deputy Prime Minister served as a dampener to PSU stocks such as Kochi Refineries and GAIL.

In the recent past, the KRL stock had been witnessing some positive activity in anticipation of the CCD taking a decision on disinvestment in BPCL.

Rumours of KRL being merged with BPCL in FY03 had resulted in the counter moving up almost 8.5 per cent in the recent past. However, brokers said that indications that the scheduled December 7 meeting may not occur have seen the stock move into negative territory.

"The company's valuation is hinging on divestment. Price movement is likely to mimic larger refinery companies i.e. at least till the sector is clear on what happens to BPCL and HPCL. However, if such comments keep shooting out, it really is not going to help the company," an analyst said.

And then there is the fact with Reliance in the field, supply is bound to be more than the demand. The perception being that one would have to look at the export market for demand.

KRL was acquired by BPCL at the end of FY01 for Rs 6,500 crore as part of industry restructuring. The company operates a 7.5 MMPTA refinery and is reportedly looking to increase its capacity.

The stock closed at Rs 44.25 on the BSE, down 2.75 per cent, with around 93,676 shares being traded. On the NSE, the stock ended the day at Rs 44.50, down 1.87 per cent with around 1.32 lakh shares being traded.

Despite the current weakness, technical experts maintain say that in the near future the stock could see an upside of Rs 55-60.

As for GAIL, with gas prices firming up around almost Rs 20 per kg and reports of the Government considering diluting its equity further, the stock moved into positive territory last week.

The interest in the counter has been attributed to the confidence in the disinvestment process. Brokers said that the upside could also be due to the bottoming out of the petrochem cycle.

However, the stock ended negative territory on Tuesday following the Disinvestment Minister's comment that the disinvestment target may not be met.

Analysts say that the stock would see a downside from Rs 75 levels. The stock ended the day at Rs 68.35 on the BSE, down 2.75 per cent with around 6.02 lakh shares traded. On the NSE, the share closed at Rs 68, down 1.45 per cement with around 3.24 lakh shares traded. The stock witnessed a huge block deal of 3.96 lakh shares at Rs 69.75 on the BSE.

"It is not a liquid stock. However fundamentally the stock is looking good. New projects (the Secunderabad/Hyderabad line to be laid down), the fact that the company has right of way in almost all the states plus a fibre optic network which they propose to lease out private parties etc, should help maintain a bullish outlook on the stock," the analyst added.

The company also has a small petrochem plant, which is running on gas to maintain efficiency.

"It is a PSU story all the way. There has also been a tremendous amount of speculation in these counters. However, the Finance Minister's statement that the Government is fully committed to the disinvestment programme may well see a turnaround at these counters. Hence the downside could be limited," an analyst added.

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