Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Energy: Activity heats up - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 18, 2002

    Energy: Activity heats up

    Last week activity on the oil counters heated up with media reports of Bharat Petroleum Corporation (BPCL) planning to merge with its subsidiary, Kochi Refineries Ltd. (KRL). BPCL has clarified that only informal talks have been held between the two companies and there is no formal proposal before the boards.

    Merged entity performance
    (Rs m) FY01 9mFY02
    Net sales 530,687 309,958
    Other Income 4,098 1,732
    Expenditure 511,315 295,730
    Operating Profit (EBDIT) 19,372 14,229
    Operating Profit Margin (%) 3.7% 4.6%
    Interest 3,655 3,160
    Depreciation 7,660 4,020
    Profit before Tax 12,156 8,781
    Extraordinary items - (578)
    Tax 3,015 3,010
    Profit after Tax/(Loss) 9,141 5,193
    Net profit margin (%) 1.7% 1.7%
    No. of Shares 334.6 334.6
    Diluted earnings per share* 27.3 20.7
    P/E Ratio   20.6
    *annualised ** merger ratio 4:1

    Nevertheless, the KRL stock was frozen on the upper circuit (20%) for much of the day, as investors' believed the merger ratio is likely to be favourable for KRL shareholders. There is significant disparity in merger ratio based on last traded price and book value. Historically, while petroleum stocks have been undervalued, the recent disinvestments and deregulation in the industry has unlocked value in BPCL and HPCL. But pure refinery companies have not witnessed a similar rise leading to the wide disparity in valuations.

    The financial story
        BPCL KRL
    CMP Rs 319.5 43.8
    Sales Rs m 354,590.7 58,686.7
    EBITDA Rs m 16,132.0 2,839.3
    PAT Rs m 6,356.0 568.3
    OPM % 4.5% 4.8%
    NPM % 1.8% 1.0%
    EPS Rs 21.2 4.1
    BVPS Rs 136.0 98.5
    Shares o/s Nos 300.0 138.5
    Mkt. Cap Rs m 95,850.0 6,058.1
    EV Rs bn 130.7 14.7
    P/E x 15.1 10.7
    CMP/BVPS x 2.3 0.4
    EV/EBITDA x 8.1 5.2
    RoNW % 20.1% 8.0%
    RoA % 6.3% 2.1%

    On current market price basis the merger ratio stands at 7 shares of KRL for each BPCL share. While on book value basis the ratio works out to 1.4 shares of KRL for every BPCL share. With the wide range in the ratio, the net asset value (replacement cost) could give a better feel to the likely merger ratio. On net asset value basis the ratio is likely to be in the range of 3-4 shares of KRL for every BPCL share. Consequently, in the event of a merger, there is considerable upside to the KRL stock.

    A merger ratio less than 5 shares of KRL for every BPCL share is not likely to be accretive to the earnings of the merged entity. BPCL earned Rs 21.2 per share on an annualised basis for 9 months ended December '01. Merger of the two companies is likely to make the bidding procedure simpler on divestment. BPCL holds 55% of KRL and 63% in the 3 m tonne Numaligarh Refinery Ltd.



    Equitymaster requests your view! Post a comment on "Energy: Activity heats up". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Oil India Ltd: A weak quarter (Quarterly Results Update - Detailed)

    Jan 24, 2017

    Oil India Limited announced results for the quarter ended September 2016. The company has reported an 6.5% and 7.8% Year on Year (YoY) decline in sales and net profit respectively during the quarter.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    Nov 3, 2016

    ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 23, 2017 (Close)