HPCL declined from its higher levels on Wednesday, largely due to institutional selling pressure.

The stock of the state-run refiner was in the red in mid-afternoon trades, sharply off its higher levels, after an early surge.

At the time of writing this article, the Hindustan Petroleum Corporation scrip was down by 1.44% at Rs 297.75 on the BSE, near the day's low of Rs 297.50. It clocked a volume of 1.05 million shares.

Earlier, the scrip surged by 1.75% in mid-morning trades to a high of Rs 307.40.

Dealers said there was institutional selling pressure in the HPCL stock at higher levels. The names of institutions behind the sell-off were not known. Market men said there were both positive and negative developments for the stock.

The negative development is the threat of oil sector employees to block the HPCL and BPCL divestment. On Tuesday, 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 employees.

The positive development for the stock is reports that the privatisation process for HPCL may commence soon. However, there have been some contrary reports. While there were rumours that HPCL's divestment may be completed by June 2003, there was also market buzz that the government may postpone the divestment till November 2003, by which time the state assembly elections get over.

Meanwhile, market men feel that the reserve price (which is the minimum price below which the divestment may not take place) which the government sets for HPCL divestment may be muted due to non-permission for public sector undertakings to bid for HPCL. That will leave players like Reliance and some foreign oil majors in the fray. Still market men said there could be aggressive bidding for HPCL, in the range of Rs 800-900 per share, for acquiring the strategic 34% stake.

Earlier, the government had given a green signal for divestment in HPCL. As per plan, the government will offload 34% stake in HPCL by way of strategic sale, 5% will be offloaded to the company's employees and it will retain 12%. Currently, the government holding in HPCL is 51.01%.

For Q3 ended December 2002, HPCL posted a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 3.3 billion), 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.

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

BSE Code: 500104