Refinery stocks on the rise

Refinery stocks have hogged the limelight in the recent bull rally which saw the Sensex touching the 17K milestone. The sector has been re-rated due to the rising cost of setting up greenfield refineries and the stupendous rise in share price of RPL.

The stocks of pure oil refining companies have advanced in the range of 18 to 80 per cent since August 23, when the markets started recovering from the sub prime crisis. 

SHOOTING UP
Company	Current Price (Rs)	%  change*
Bongaigaon Refinery	69.50	43.28
BPCL	372.90	23.55
Chennai Petrochemicals	287.35	9.06
Essar Oil	61.00	25.08
HPCL	275.30	19.71
IOC	491.45	29.43
MRPL	73.35	79.68
RPL	159.35	47.67
* Over August 23 closing price

A Citi Group report pointed out that green field refinery costs have shot up globally and therefore the rise in the stock prices is not surprising.

According to Rohit Nagraj, oil & gas analyst, Angel Broking the rise in the cost of green field refineries, however, may not be a big trigger for the domestic oil companies.

"Since Reliance Industries is the only major exporter, the other companies may remain untouched. However, the sector has not performed too well in the recent times and is now being purely driven by the market momentum," he said.

The counter of Mangalore Refinery & Petrochemicals has surged the most. The stock has risen by 80 per cent since 23 August and closed at Rs 73.35, up by 0.96 per cent on Monday. The company recently received a huge long-term order from Shell India for the supply of naphta.

The share prices of government owned HPCL, BPCL and IOC have gone up substantially as well. According to experts, the rise in public sector refineries is mainly due to the recent announcement by the government that it would issue bonds worth Rs 12,000 crore to state-run oil refining and marketing companies by October 15.

Reliance Petroleum, promoted by Mukesh Ambani, has gone up by 47.80 per cent in a month's time, though it would start commercial production only next year. The stock closed at Rs 159.35, up 3.81 per cent on Monday.

In terms of market capitalisation (m-cap), RPL has already crossed Indian Oil Corporation (IOC), the country's largest refining company. The current m-cap of RPL is over 71,000 crore compared with IOC's 58,000 crore m-cap.

According to market sources, the rise in RPL is mainly due to the fact that Reliance Industries holds 75 per cent in the company.