The Hindu Business Line : Most refining stocks shine

Kolkata, Nov. 15 Almost all the refining stocks from both public and private sector, expect RIL and RPL, have posted 10-30 per cent gains on Thursday.

Fundamentally, the reasons may be as varied as expectation of a retail price rise shortly, coupled with sops to ease the liquidity crisis of the marketing companies by the Government, and rise in the refining margin.

For Essar Oil — best performer of the day — however, there was some added impetus. The board of directors of the company will meet on Friday to discus the preferential allotment of securities and warrants to promoters. Essar closed 30.5 per cent higher at Rs 157.65 at BSE.

Though the company denies any further clarification on the scheduled board meet, market sources say that the offer is part of the company’s plan to raise finances for a $1.2 billion expansion plan including the expansion of the refinery. A total of $750 million of the same may be raised through debt.

However, while a higher gross refinery margin will surely improve the profitability of the refinery, industry sources rule-out a possibility of the Government helping the cause of the private sector players on the fuel retailing front.

The fuel retailing foray of Essar and Reliance have run into rough weather for more than a year now.

The movement of PSU refining and marketing stocks were no less impressive. IOC gained by 10 per cent to Rs 596, BPCL 18 per cent to Rs 427 and HPCL by 15 per cent to Rs 299.

PSU refiners

The performance of the standalone PSU refiners like MRPL (22 per cent) and Bongaigaon Refinery and Petrochemicals (30 per cent) was even stellar. Chennai Petroleum — standalone refiner and a subsidiary of IOC — moved up 11 per cent.

MRPL — an ONGC group company — has become surprisingly active during last few months and closed at Rs 127 at BSE on Thursday. The scrip also touched its 52-week high on Thursday at Rs 131.

The refinery, currently being expanded to 15 million tonnes (mt), is planning an aromatic unit through a subsidiary. Plans are also under consideration for setting up an additional 15 mt capacity in joint venture with the private sector.

On the contrary, BRPL has a minuscule 2-2.3 mt capacity in Assam and is due to be merged with IOC. “It is difficult to say what triggered such huge gains across the refining stocks,” said an industry source.

He prefers to describe the movement as an effort to match the M-cap of RPL which has recorded a greater capitalisation than all other stocks put together. This, even though the installation of the refinery is almost a year away.