BPCL shares had scaled similar levels in November last year, before the divestment
process faced a temporary halt.
An analyst at a foreign brokerage said the target price of Rs 500 was based on the acquisition premium. However, the valuation based on BPCL’s assets could be much higher, which is what potential buyers would consider.
A buyer with a long-term horizon is likely to pay a premium, given the head-start it would get over others.
Analysts expect Reliance Industries (RIL) to enter the race — given that it is now net debt-free — besides Saudi Aramco, Rosneft, ExxonMobil, and ADNOC.
For the government’s 53 per cent stake and open offer for 26 per cent, one would have to shell out Rs 94,000 crore at Rs 550 a share, said analysts at Emkay Research. They added that if BP participates (as RIL’s partner), the consideration for RIL could be under Rs 50,000 crore.
Conversely, if RIL decided to bid solo and emerges the winner, it could re-pitch the oil-to-chemicals business to Aramco at a higher valuation, and eventually self-fund BPCL’s acquisition.
Some analysts, such as Yogesh Patil at Reliance Securities, don’t expect RIL to bid, given it is focusing more on Jio and its retail businesses. However, progress on the divestment front will spur BPCL’s jump on the bourses.
Prospects for oil marketing companies
have improved after the lockdown, which had impacted demand in April and May. Given that demand for auto fuel is improving, price hikes taken by companies
recently will aid their financials and marketing margins.