BPCL’s sale to private player will unlock real value: Experts

Shares of BPCL fell for the first time in 10 sessions amid reports that the government is mulling divesting 53.29 per cent stake in the company to IOC or even private players.

Such a divestment to IOCL will create a behemoth, although it is unlikely to alter market dynamics in the near term, said brokerage Prabhudas Lilladher (PL).

In case of merger of BPCL with IOCL, “Funding the BPCL stake by IOC will not be a major concern, as IOC's net debt-to-equity stands comfortable at 0.55 times. Besides, IOC also holds value accretive stakes in ONGC, GAIL and OIL India. But BPCL has a much better earnings profile with ROEs of over 20 per cent vis-à-vis 15 per cent for IOCL,” PL said.


The brokerage said that the stake sale to private foreign players will help unlock the real value of the company and help realise government strategy to bring competition in fuel retailing and break the hegemony of the OMCs. Post sale, share of private players in fuel retailing will increase to 33 per cent from current 10 per cent, PL said.