HPCL surged on Tuesday on renewed buying support.

The stock of the state-run oil refiner was up by 1.99% at Rs 310.50 on the BSE in the first couple of hours of trading. However, it slipped from the day's high of Rs 312.30, thereby displaying volatilty. On Monday, it ended with a modest gain of 1.9% at Rs 304.45, after rising by as much as 5.4% earlier in the session to Rs 314.90.

The HPCL stock currently trades at a multi-month high, having surged sharply from its late September 2002 low. Expectations of divestment have been the prime driver of the stock in the last few months. The stock today clocked a good volume of over 1 million shares on the BSE by mid-morning trades as compared to 1 million shares on Monday. The stock has turned volatile, easing after rallying earlier in the session.

The latest surge on the counter comes, after the government last Friday (on 7 February 2003), invited initial bids for divesting its 34% stake in the company by way of strategic sale. Bidders can submit the initial bids by 17 March 2003 and the government has set a net worth criteria of Rs 2,500 crore (Rs 25 billion) for them.

Some of the foreign companies like Shell and Indian private sector giant Reliance Industries are expected to submit the bids for acquiring control over HPCL. However, the state-run firms cannot bid for HPCL as per government's decision.

As per market buzz, the government has set Rs 395 as the reserve price for HPCL (which is the minimum price below which the divestment may not take place). Currently, the government holding in HPCL is 51.01%.

HPCL has about 4,600 retail outlets in India and a 20% market share in retailing petroleum products.

The negative development is the threat of oil sector employees to block the HPCL and BPCL divestment. Last week, Disinvestment Minister Arun Shourie said that any strike by oil sector workers to oppose the stake sale in cash-rich oil firms - HPCL and BPCL - may hurt the valuation of these companies and also reduce the benefit to the employees.

For Q3 ended December 2002, HPCL posted a gigantic 444% rise in net profit to Rs 330.62 crore, compared to Rs 60.81 crore in the corresponding period of the previous year. Net sales jumped by 28% to Rs 14,210.23 crore (Rs 142.1 billion) from Rs 11,1156.38 crore (Rs 1111.56 billion) in DQ 2001. The company attributed the solid performance to buoyant international oil prices coupled with improved refining and marketing margins.

BSE Code: 500104