Energy: Price of industry restructuring - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Energy: Price of industry restructuring

Apr 4, 2001

The restructuring within the energy sector is complete. The road map was laid down by the Sengupta committee, which put forward the proposal of merging stand-alone refineries with their refining and marketing (R&M) counterparts.

Bharat Petroleum (BPCL) and Indian Oil (IOC) have completed their acquisition of stand alone refineries. BPCL has acquired Kochi refineries (KRL) and is in the process of completing the acquisition of Numaligarh Refineries (NRL). IOC on the other hand has completed the acquisition of both Chennai Petroleum (CPCL) and Bongaigaon Refinery and Petrochemicals (BRPL).

Cost of Consolidation
KRLCPCLBRPL
No. of shares m 137.8 147.2 199.8
Government holding55.0%52.5%74.5%
Shares acquiredm 75.8 77.3 148.8
Purchase price Rs 86.0 65.9 10.0
Acquisition costRs m 6,522.7 5,095.3 1,487.9
MP*Rs 56.6 36.1 8.3
Premium to MP51.9%82.6%21.2%
Book ValueRs 95.8 78.3 30.9
* At time of announcement

Was the deal worth it
KRL*CPCL*BRPL*NRL*BPCLIOC
CapacityMMTPA 7.5 7.0 2.4 3.0 7.0 35.5
EVRs m 16,158 19,417 2,202 9,053 78,537 257,640
EV / tonneRs 2,154.4 2,773.8 917.6 3,017.5 11,219.6 7,257.5
* Based on the acquisition price by R&Ms

The EV (Enterprise Value) per tonne for stand-alone and refining & marketing (R&M) companies will differ as BPCL and IOC are better integrated along the value chain (have access to marketing infrastructure). The value of their marketing infrastructure is included in the EV, which leads to the disparity.

Although the acquisition price has been significantly higher than the market price, on an EV per tonne basis the deals look attractive for BPCL and IOC. As per industry estimates the cost of setting up 1 tonne of refining capacity is approximately Rs 5,500. This again is dependent on the complexity of the unit. A discount to this figure may indicate that the capacities are old and low on complexity.

Equitymaster requests your view! Post a comment on "Energy: Price of industry restructuring". Click here!

  

More Views on News

5 Green Energy Stocks to Watch as India Readies for a Revolution (Views On News)

Oct 13, 2021

The excitement around green energy stocks has opened up a huge contrarian opportunity in the traditional energy space.

Top Performing PSU Stocks over the Past One Year (Views On News)

Oct 1, 2021

After a decade of underperformance, PSU stocks have woken up. Here are the best performing PSUs of past twelve months.

Linde India Shares Hits New High. Up 230%+ in One Year (Views On News)

Aug 26, 2021

Linde India shares have surged sharply in the past few trading sessions. What's causing the rally?

ONGC Logs Massive Jump in Net Profit as Crude Oil Prices Double (Views On News)

Aug 16, 2021

Rising crude oil prices compensate ONGC's fall in production.

HPCL Shares Under Pressure After Profit Declines in June Quarter (Views On News)

Aug 5, 2021

Rising crude oil prices and forex woes weigh on HPCL's quarterly numbers.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE OIL & GAS


Dec 7, 2021 10:50 AM

S&P BSE OIL & GAS 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS