Analysis on BPCL:
Is it the right time to Invest in BPCL ?
Bharat Petroleum Corporation Limited's (BPCL's) stock, which had gained 43% since October and was trading near 52-week highs, was down almost 5% in the morning trades on Tuesday. The fall comes on the back of reports of the company's move to sell treasury stake worth over ₹3,700 crore.
A sub-committee of the board of directors of BPCL had approved the sale of the company's equity shares held by BPCL Trust for Investment in Shares. The total number of equity shares being offered is up to 158,993,397 equity shares held by the above trust. With the stake sale progressing on Tuesday, the stock was bound to trend lower. Nevertheless, the stake sale also signals progress on resolving the key issues related to privatization, say analysts who also expect BPCL to distribute proceeds from the treasury sale as dividends.
Zee Business Managing Editor Anil Singhvi said that today there was a Big Block Deal that went through on BPCL. The company is going to sell 16 cr shares worth Rs 7000 cr via Block Deal. Treasury shares means the company that has its own shares, explains Singhvi. Generally, companies sell Treasury shares and try to avoid keeping them. So, while investors get the shares, the company gets cash, says Singhvi. BPCL share price today is Rs 444, down Rs 23 or 4.9%.
The key issue is, what will be the purpose of generating this much cash? Anil Singhvi said there is a big possibility that ahead of Divestment, BPCL may announce a big dividend from the cash generated via selling Treasury shares. The amount left after deducting tax from Rs 7000 cr will be used by the company to distribute dividend to BPCL shareholders.
Anil Singhvi recommends that investors should buy the shares when the Block Deal happens. Singhvi says it is a golden chase for investors who intend to invest in BPCL. Sellers are giving a good buy opportunity to investors. The floor price for the deal is Rs 435. Investors should buy BPCL for Dividend and Divestment.
This is for investors who will stay invested in the stock and reap benefits of Dividend and Divestment.
The share price of BPCL may fall below the floor price of the Block Deal and market risk will remain, the same as with any other stock, explained Singhvi.
The country’s second biggest state refiner Bharat Petroleum Corporation (BPCL), which is one of the key divestment candidates of the government, launched a block deal on March 8 to sell up to 4 percent of its treasury shares worth Rs 3,700 crore, sources with the knowledge of the matter told CNBC Awaaz.
According to the term sheet of the deal, reviewed by CNBC Awaaz, BPCL has set a floor price of Rs 435 per share for the proposed transaction which is at a 7 percent discount to the closing price on March 8, 2021.
To be sure, around 9 percent of the equity shares of BPCL were created as treasury shares post the 2013 merger of the refiner with state-run Kochi Refinery. Two percent of those treasury shares were earmarked for the employees benefit trust, leaving behind a kitty of 7 percent shares.
“As of now, the block deal is for 4 percent of the shares, but based on market demand, the size may be hiked to 7 percent. The situation is fluid as of now," one of the individuals cited above told CNBC Awaaz.
“Most of the proceeds of the BPCL block deal are likely to be used for a special dividend for shareholders going ahead,” said a second individual.
“Citi, Kotak and ICICI Securities are the bankers to the block deal," the second individual added.
Both the individuals spoke to CNBC Awaaz on the condition of anonymity. BPCL and the bankers could not be contacted for immediate comment.
Recently, in a move considered as a first step towards its divestment, BPCL approved the sale of the firm's holding in the Numaligarh Refinery for Rs 9,878 crore.
The government plans to conclude the strategic sale of BPCL in the June quarter, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had said In February, 2021.
Three preliminary bids have been submitted for buying a controlling stake in BPCL. Back in November, mining-to-oil conglomerate Vedanta had confirmed putting in an expression of interest (EoI) for buying the government's 52.98 percent stake in BPCL. The other two bidders are said to be global funds, one of them being Apollo Global Management.
On the back of treasury stake, the BPCL has fallen 5% .. According to me the fall in today's market is the best time to invest in BPCL for a good return in a short span.
The levels of 430-440 are good levels to enter in the stock. Take this as an opportunity to invest for a target of Rs 500 for a short time..
So don't lose these levels and put ur capital and earn awesome returns.
