Emkay Global Financial has given Buy recommendation for Bharat Petroleum Corporation with a target price of Rs. 495 in its research report issued on Mar 02, 2021

Emkay Global Financial’s report on Bharat Petroleum Corporation

BPCL board has approved the sale of its 61.65% stake in Numaligarh Refinery to a consortium of Oil India and Engineers India, and the Assam govt. for Rs98.8bn. The sale is expected to close within a month post all approvals, including BPCL shareholders’. The deal implies a valuation of Rs160.2bn for NRL as a whole. With Rs30-40bn of average annual EBITDA and Rs12.8bn of net cash equivalent, the deal implies 5.5-7.9x PE and 3.6-4.7x EV/EBITDA − lower than the ballpark rate of 8-10x and 5-7x, respectively. It is also 6% lower than our valuation of Rs171bn for NRL. Though, it lowers BPCL’s FVTP by just ~Rs3/sh. It is sizably higher than what was quoted by media reports and Assam govt’s budgeted valuation of Rs100-130bn. Hence, we view the deal as neutral to positive.


The sale is an important milestone in BPCL’s disinvestment process, and cash proceeds may also be paid to BPCL shareholders as a special dividend of Rs40-50/sh in the next 1- 2 months. Retain Buy and OW on BPCL, with a TP of Rs495.