Bumper payout buzz fuels refinery scrips

Stocks seen as good buys on low valuations

The BSE PSU Index hit an all-time high yesterday with most public sector undertaking (PSU) stocks attracting significant buying interest.

The stocks of three major public sector refineries "" Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation (IOC) "" were up on expectations of high interim dividends.

These stocks have been the market's favorite in the last few days with their prices surging.

The market has been buzzing with talks that these companies will pay a huge interim dividend for 2003-04.

BPCL surged to a 52-week high of Rs 467.20 today on huge buying interest before closing at Rs 456.45, up by 12.85 per cent.

HPCL was up by 5.65 per cent to close at Rs 433.30 and IOC was up by 3.59 per cent to close at Rs 422.40.

The three counters have been attracting buying interest in the last few days following announcements by the companies that they will announce interim dividends for the current year.

High interim dividend payouts are not the only reason for the counters doing well with most analysts and players saying that these three refinery stocks are good buys because of their relatively low valuations.

The government's disinvestment programme for the year was expected to rake in at least Rs 13,000 crore but it has managed only around Rs 1,100 crore from the Maruti Udyog sell-off so far.

With the disinvestment programme coming to a standstill due to a variety of reasons including opposition from trade unions and political parties, the government is looking at big dividends to bail it out.

Most analysts agree to this line of thinking but certain players feel that this may hurt the expansion and upgradation plans of PSU companies.

Says an analyst at a local brokerage, "Demand for petroleum products is also expected to go up in the coming months on the back of a revival in rural demand."

IOC has 10 refineries and over 22,000 petrol pumps, BPCL has about 4,500 retail outlets and HPCL has about 4,600 retail outlets.

BPCL has reported a 47 per cent growth in net profit at Rs 477 crore for the first quarter ended September 30, 2003.