HPCL and BPCL were compelled downward today as marketmen reckon that their divestment may not even take place in the current calendar.

HPCL dropped 3.47% to Rs 298 and BPCL moved lower by 1.76% to Rs 237.50 on BSE by 11:25 IST. Volumes on the two counters aggregated to over 4.55 lakh shares and close to 52,000 shares, respectively. In 14 sessions between 25 April and 16 May 2003, HPCL jumped 14.6% and BPCL rose 8.2% .

The scrips are being hurt by rumours over further delays in disinvestment.  Market talk has it that an unidentified legal wrangle has cropped up in the disinvestment process of the two companies. This is giving rise to the contention that the disinvestment of the two companies will not take place in 2003. The government, perhaps, is facing too many obstacles towards disinvestment of the two companies. The strong resistance from Opposition parties as well as some members of the ruling National Democratic Alliance and the forthcoming general elections may force the government to put off the disinvestment agenda, they added.

Earlier, there were reports that the disinvestment ministry is likely to begin the due diligence for HPCL by June-end and appoint an adviser to pilot BPCL's public offer by mid-June. There were also reports that the Supreme Court (SC) had issued a notice to the Centre over the proposed disinvestment in state-run oil refiners. The notice followed a public interest litigation filed with the SC by the Centre for Public Interest Litigation (CPIL) terming the disinvestment as illegal. CPIL contends that the government's decision to divest stake in HPCL and BPCL did not have parliamentary approval.

HPCL and BPCL, which together command a 40-45% market share for petroleum products, were nationalised through an Act of Parliament in the 1970s and CPIL contends that disinvestment in these two companies could be done either by repealing or amending the acquisition Acts concerned and that there was no other way of going about it.

Earlier, the Centre announced plans to offload its stake in BPCL through the initial public offer (IPO) route and the privatisation of HPCL through a strategic sale.

As per plans, 34.01% of HPCL's equity would be sold to a strategic partner and 5% to the company's employees. The Centre would retain 12% holding in the company. Currently, the Centre's stake in HPCL is 51.01%. In respect of BPCL, the Centre has planned an initial public offer (IPO) involving 35.2% stake, while 5% would be reserved for company employees. The Centre would retain 26%.

HPCL has about 4,600 retail outlets and a 20% market share in retailing petroleum products. BPCL has about 4,500 retail outlets and a 20% share in the petroleum products market. As per recent reports, BPCL plans to double its refining capacity to 2,40,000 bpd from the current 1,30,000 bpd by October 2004, and modify its refineries so that it can process different grades of oil. The total cost of the expansion and modernisation is estimated at Rs 1,831 crore, of which Rs 1,200 crore has already been spent.

For the third quarter ended 31 December 2002, HPCL registered a gigantic 444% rise in net profit to Rs 330.62 crore (Rs 60.81 crore) on a 28% jump in net sales to Rs 14,210.23 crore (Rs 11,115.60 crore). BPCL recorded a net profit of Rs 233 crore, up 224% over the Rs 71.90 crore it registered in the corresponding period of the previous year. Net sales increased by 29% to Rs 12,645.2 crore from Rs 9,801.1 crore in DQ 2001.