The Hindu Business Line : HPCL up despite thumbs down to disinvestment

THE stock of Hindustan Petroleum Corporation Ltd (HPCL) appears to have regained some of its lost ground on the bourses despite signals that the Union Government may not disinvest from the oil PSU and firm international oil prices.

The stock closed at Rs 327.35 per share on the BSE on Friday, 4 per cent higher than Thursday's Rs 314.60. This is an improvement compared to the continuous fall in HPCL stock prices from May 13 — the day it became clear that privatisation would not be part of the new Government's mandate.

The share, which had touched a high of Rs 542.45 per share in anticipation of the Union Government selling 34.01 per cent stake of its stake in the oil marketing company to a "strategic investor" last year, fell to Rs 300 .65 per share on May 31.

Brokers said a couple of foreign broking houses have also put out a buy report on the company, which has fuelled interest in the stock.

"But the company has strong fundamentals and this was proved in the last few days," said a senior HPCL official. "For instance, we have been working on fundamentals. Interest payments were cut by more than half to Rs 16.28 when we paid Rs 28.11 crore in the fourth quarter," the official said.

According to the official, HPCL's 22 per cent dividend announcement could have also led to an improvement in stock prices. "It translates to almost 30 per cent returns for a retail investor," the official said.

Although HPCL's net profits in fourth quarter fell 16.8 per cent because of pressure on marketing margins, its sales last year had gone up by almost 6 per cent both in the last quarter as well as whole year.

An anticipated increase in retail prices of petrol and diesel on June 15 could be another reason for the rise in HPCL stock prices, the official said.

However, according to Mr Gul Tekchandani, CIO, Sun F&C Asset Management Company, the current upside in the PSU counters is more of a technical bounce back. "Going forward, the markets are likely to be range-bound and as such individuals should not look at daily movements. With regard to top oil refining companies, one can presume that certain value investors are looking at such stocks for a long-term horizon," he said.