The Hindu Business Line : HPCL, BPCL gain as crude slips from peak

THE HPCL and BPCL stocks moved up today with volumes amid a general gloom in the market. This was on expectation of a better bottomline in the current quarter in view of substantial fall in crude oil prices.

The BPCL counter gained 2.94 per cent with a traded volume of 8.24 lakh shares, while HPCL stock improved by about one per cent with a traded quantity of 13.73 lakh shares on the NSE.

According to analysts, soaring crude oil prices through 2004-05 have been affecting HPCL and BPCL profitability. The two refinery and marketing companies, which directly imported crude (roughly 70 per cent of their total requirement) from a basket of sweet and sour variety, saw a steep rise in their import prices.

An industry insider told Business Line that in the 1st week of April 2004, the average price of import basket of crude was around $30 per barrel.

During the second quarter of 2004-05, the average import price moved to a high of $41 a barrel; in the 3rd quarter of 2004-05, it moved between $47 and $48 a barrel. However, in the first week of April, the basket price hit the roof at $52 a barrel. In March this year it first crossed the $50 a barrel mark.

According to a fund manager, the fourth quarter profitability was hit when the import prices peaked for the whole fiscal. "Without resorting to any hedging mechanism, HPCL and BPCL have taken the full blow of a sharp rise," the fund manager observed.

The basket of crude which domestic PSU players have access to has seen a drop of around 15 per cent last week from its peak of $52 a barrel early this month, an official on the import desk of a oil refiner pointed out.

However, since this fiscal onwards, the refiners are free to fix their gross refining margins, refining efficiency would be crucial for deriving benefits on this account.

According to Mr Devarsh Vakil of Anagram Stockbroking, for merger of KRL with BPCL and its plan to expand its retail business overseas, starting with retailing Singapore has attracted additional attention from the investors.

The stock traded at 11 times its trailing 12-mont EPS of Rs 34.30.

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