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.
Look beyond divestment - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 31, 2002

    Look beyond divestment

    The Indian bourses continue to revolve around the divestment bubble, US-Iraq tussle and the rising crude prices. The PSUs continue to be volatile driven by the 'yes', 'no' attitude in the cabinet. We try and look at some recent changes in the way PSUs, especially oil PSUs are looking at countering the future.

    It is only in the last couple of years that the markets have discovered PSUs. Much of this interest has infact stemmed from the divestment programme. Investors were enthused by the fact that these cash rich companies with great potential will pass on to efficient managements after disinvestment. The dismantling of the APM was another shot in the arm for oil PSUs.

    But what became increasingly evident was that these stocks got rated as per the government's move on divestment. So whenever a CCD meeting was scheduled, the speculators had a field day, and continue to do so. But a retail investor does not have either the time to continuously monitor the 'body language' of a particular minister nor the big money to really speculate.

    Vital stats…
    FY03E (x)
    BPCL 215 6.3 4,489 petrol pumps, 1,345 LPG dealers and 19 aviation
    service stations
    HPCL 291 14.3 4,729 petrol pumps, 1,822 LPG distributors and 10 aviation
    fuel stations
    GAIL 71 4.7 Owns in excess of 4,000 kms of pipeline and controls 95%
    of the natural gas business in the country.

    What he must therefore look at is the growing proactivity of the PSU managements ever since they have been left open to competition and face the threat of being divested. The service offerings which one gets at a PSU bank or through state owned telecom units BSNL and MTNL is better than what we have seen a few years ago. Of course, there is a lot of scope for improvement for these companies laden with years of 'babudom'.

    Even among oil PSUs, one hears of IOC expanding in Mauritius and Sri Lanka, ONGC looking at buying stake in oil fields in the former Soviet Union and the Middle East. Recently a consortium led by ONGC's subsidiary, ONGC Videsh along with IOC and Oil India bagged the exploration rights of an offshore oilfield in Iran. Notice the HPCL campaign of 24 hr LPG cylinder delivery on prime time network. This statement would have been unheard of even a couple of years ago. If we notice the petrol pumps of both HPCL and BPCL, they seem to be getting an international look. The petrol pumps seem more orderly.

    Per-capita consumption of oil: Growth potential
    Calendar year 2000 India U.S China World
    Consumption (m kgs) 97,600 897,400 226,900 3,503,600
    Population (m) 1,033 285 1,273 6,137
    Per-capita 94 3,149 178 571

    What we are trying to say here is that, though divestment of these companies will be a big booster for their fortunes, one can purely look at them from the fundamental long-term perspective. When the divestment happens it can be considered as good luck. If it doesn't, you still have bought into a decent company, with good growth prospects in the 'black gold' industry. But the trick here is to look at the fundamentals carefully and decide.

    For more, view our research reports on BPCL, HPCL,GAIL



    Equitymaster requests your view! Post a comment on "Look beyond divestment". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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 18, 2017 (Close)