BPCL: Gaining momentum

BPCL: Gaining momentum

Shares of privatisation-bound BPCL climbed nearly 6% after it exited Numaligarh refinery in Assam by selling its entire stake to a consortium of Oil India and Engineers India for Rs 9,876 crore.
The Numaligarh stake sale is an important and necessary step towards completing the privatisation process by July-August, which should keep the excitement high in the stock in the coming months.
The Board of BPCL approved the sale of its 61.25% stake in the Assam-based Numaligarh Refinery ahead of the divestment of the state-run refiner-retailer.

Accordingly, BPCL will be selling 45,35,45,998 equity shares of Rs 10 each (constituting 61.65% of the total equity capital of NRL), a material subsidiary company of BPCL to a consortium of Oil India, Engineers India; and to Govt of Assam, or only to the said consortium in case Govt of Assam does not participate in the purchase of said shares, in such proportion and on such terms and conditions as approved by the board.
The transaction is subject to approval from shareholders of BPCL and will get completed within a month from obtaining all requisite approvals.

Meanwhile, the deal implies a valuation of Rs 16,020 crore for the refinery as a whole. With Rs 3,000-4,000 crore of average annual Ebitda and Rs 1,280 crore of net cash equivalent, the deal implies 5.5-7.9 times PE and 3.6-4.7 times EV/Ebitda, which is lower than the ballpark rate of 8-10 times and 5-7 times, respectively.

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