Despite BPCL privatisation move, not much on table for investors, says CLSA; check target stock price

CLSA has a target stock price of Rs 300 on the shares.

After the Narendra Modi led government moved swiftly to remove legal hurdles in a bid to privatise state-owned BPCL (Bharat Petroleum), global brokerage firm CLSA said that the recent stock rally has not left much for investors. Notably, the global brokerage firm has a target stock price of Rs 300 on the shares. Ahead of a proposed move to fully privatise Bharat Petroleum Corp Ltd (BPCL), the government moved swiftly to repeal the legislation that had nationalised the company, doing away with the need to seek Parliament nod before selling it off to private and foreign firms, according to a PTI report. “The Act has been repealed and there is no need for a Parliament approval for strategic sale of BPCL,” a senior official confirmed to PTI.

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Yesterday, BPCL shares closed 5% lower at Rs 490. “The stock rally has not left much on table even under privatisation. It may trade around Rs 445 per share based on peer multiples,” the CLSA said in a report, adding the stock is already building in bids at a market capitalisation of $16 billion and is ignoring several hurdles. Notably, CLSA’s target price of Rs 300 on the stock could mean a correction of more than 40% from the current price levels.

Notably, privatisation of BPCL will come as a game-changer as the fuel retailing sector has been dominated by PSUs. It will also help the Narendra Modi-led government to move towards its ambitious disinvestment target of Rs 1.05 lakh crore for the year. Using october 4th Friday’s closing market prices, BPCL  had a market capitalisation of about Rs 1.11 lakh crore and a government stake sale could fetch upwards of Rs 60,000 crore including a control-and-fuel-market-entry premium, PTI reported citing officials as saying. For the quarter ended 30th June, BPCL had reported consolidated sales of Rs 76325.39 crore, up 2.63% from last quarter sales of Rs 74367.18 crore and up 6.30% from last year same quarter sales of Rs 71805.07 crore. The company has reported net profit after tax of Rs 1406.45 crore in the latest quarter.