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IBP: Disinvestment unlocks value - Views on News from Equitymaster
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  • Sep 5, 2001

    IBP: Disinvestment unlocks value

    Over the last one year -- point to point -- Indo-Burmah Petroleum (IBP) has run up by 177%. This is mainly on the back of the proposed disininvestment, as announced by the Government. Over the same period the Sensex has declined by 29.8%.

    IBP, the pure marketing company, will be the first of the petroleum companies to be put on the block. The Government proposes to reduce its stake in the company from 59.6% to 26%. As per media reports approximately 12 companies will be fighting it out to acquire the Government's stake. The bidders include both international and domestic oil giants namely, Indian Oil Corp. (IOC), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), Reliance Petroleum (RPL) and global majors Shell, British Petroleum (BP), TotalFina-Elf and Kuwait Petroleum amongst the many.

    The Government has called for submission of Expression of Interest (EoIs) from potential bidders and is expected to call for financial bids in September '01. Nevertheless, a few majors have reportedly pulled out from the disinvestment process. They include Caltex, Exxon and Petronas. This could be due to the delays in the divestment proceedings coupled with signs of instability at the centre indicating reduced powers to push the deal through.

    The disinvestment proceedings, none the less, has been able to unlock value on the counter. Valuations of the company have run up, coming in range of international valuations.

    Valuations: An insight
        IBP Tosco Corp.*
    Sales Rs bn 86.2 1,286.2
    EBITDA Rs bn 1.2 54.1
    PAT Rs bn 0.5 32.3
    No. of shares m 22.1 154.9
    No. of retail outlets Nos. 1,504 6,400
    EPS Rs 24.5 208.5
    Book Value Rs 166.6 994.8
    CMP** Rs 298.6 2,185.4
    Market Cap*** Rs bn 6.6 338.4
    OPM   1.4% 4.2%
    NPM   0.6% 2.5%
    Market Cap / Sales x 0.1 0.3
    Price / Book value x 1.8 2.2
    P/E Ratio x 12.2 10.5
    ** Current market price *** Market capitalisation
    * Tosco Corp. is a refining & marketing company in U.S



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