Oil India Stock Hits A 52-Week High On Plan To Bid For BPCL’s Numaligarh Stake

Shares of Oil India Ltd. jumped to a 52-week high after the state-owned oil explorer in consortium with Engineers India Ltd. decided to bid to acquire Bharat Petroleum Corp.’s stake in Numaligarh Refinery Ltd. in Assam.

BPCL holds 61.65% stake in the Numaligarh Refinery, while Oil India owns 26% as on date, according to an exchange filing. The bid is to be submitted through a formal process. The exact percentage of the stake of Oil India and Engineers India will depend on the extent of right of first offer to be exercised by the Government of Assam, which holds a 12.35% stake in the refinery.

BPCL during its third-quarter results said it was looking to complete the divestment of its stake in the Numaligarh Refinery. “We are hopeful that if the government approvals are there in the manner we work, then we will be able to close this by March 31 this year,” N Vijayagopal, director-finance at the state-owned oil marketer, had told BloombergQuint in an interview.

While announcing its plan to divest holding in BPCL, the Indian government had said the offering will include the refiner’s entire business except for the stake it owns in the Numaligarh Refinery, which it plans to transfer to a state-run oil and gas company.

According to Oil India, Numaligarh Refinery is the largest customer of the company’s crude produced from its northeastern fields. “The acquisition is expected to improve synergies in Oil India’s portfolio,” it said the filing.

Avinash Gorakshakar, director of research at Profitmart Securities, said, “I don’t think over the next 12-18 months or two years, there can be any significant rerating for Oil India only because of this transaction.” Over the long-term it will be a positive if the asset comes at the right valuation, he told BloombergQuint over the phone.

Shares of Oil India rose as much as 4.2% in early trade on Friday to Rs 126.9 apiece—the highest since February 2020. The stock is up for the fifth straight day. Of the 24 analysts tracking Oil India, 15 have a ‘buy’ rating, four suggest a ‘hold’ and five recommend a ‘sell’, according to as per Bloomberg data. The stock is trading 3.9% higher than its 12-month consensus price target of Rs 119.9.

Shares of Engineers India, too, gained as much as 3.4% to Rs 77.2 apiece. According to Bloomberg data, 13 of the 14 analysts tracking the stock recommend a ‘buy’. The average of 12-month consensus price target implies an upside of 27.1%.