Post dividend payout, progress on privatization key for BPCL
PremiumExpectations of privatization and the resultant value unlocking for investors have been a key driver for BPCL’s stock
NEW DELHI : Bharat Petroleum Corp. Ltd’s (BPCL) shares scaled to a new 52-week high on the National Stock Exchange on Thursday. A handsome dividend payout and strong March quarter performance are the reasons for investor optimism.
BPCL has announced a dividend of ₹58 per share. This is in addition to the ₹21 per share dividend announced earlier in the year. Accordingly, at the current market price, BPCL’s total dividend payout of ₹79 per share translates into almost a 17% dividend yield for financial year 2021.
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The proceeds from the treasury stock sale and Numaligarh Refinery Ltd (NRL) stake sale have been passed on to investors as dividend. It had completed the sale of its entire 61.65% stake in NRL for about ₹9,876 crore to a consortium of Oil India Ltd and Engineers India Ltd, and Assam government. Besides, it had sold treasury shares too—BPCL equity shares held by the BPCL Trust for about ₹5,510 crore.
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Given that both events were for paving the way for BPCL’s privatization, the Street would keenly watch further progress on its privatization plans. As such, expectations of privatization and the resultant value unlocking for investors have been a key driver for BPCL’s stock, which has risen by over 40% over the last year. “Privatization is key for further upside," analysts at Jefferies India Pvt. Ltd said in a report.
BPCL’s March quarter performance remained strong. Marketing and refining margins were better than expected, and were supported by inventory gains (carrying over of lower-priced inventory in a rising crude oil price environment). BPCL reported inventory gains of ₹3,640 crore —refining and marketing gains of ₹1,810 crore and ₹1,830 crore, respectively— said Motilal Oswal Financial Services Ltd analysts.
Going ahead, improving benchmark refining margins would augur well for the firm. With retail price hikes continuing, the outlook for the marketing segment is decent, too. Furthermore, with state polls over, the overhang of government intervention on fuel pricing is also behind, although auto fuel volumes may get impacted.
To be sure, Jefferies India analysts have cut marketing volume estimates by 9-8% for FY22-23 to factor in the covid-related disruptions. While Ebitda estimates have been cut by 8% for FY22 and 5% for FY23, respectively, the earnings per share is still expected to rise, thanks to the company’s shift to a lower tax regime.
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