Here’s why Hindustan Petroleum shares rallied over 7% today

• Hindustan Petroleum (HPCL) shares gained over 7% after the oil refining and marketing giant approved the buyback of 10 crore shares.
• The second-quarter net profit of HPCL more than doubled, led by the surge in refining margins and inventory gains
• The gross sales revenue stood at ₹61,340 crore and was lower than ₹66,165 crore of Q2 of the previous financial year due to lower oil prices.

The shares of Hindustan Petroleum (HPCL) gained over 7% after the oil refining and the marketing giant said that its board had approved a proposal to buyback up to 10 crore shares, representing 6.56% of paid-up equity capital of the company, at ₹250 per share.

The buyback price represents a 33.88% premium over HPCL’s last closing price on Wednesday. In a regulatory filing on the BSE, HPCL said that the buyback remains at ₹2,500 crore, but the number of shares could be higher than maximum buyback shares (10 crore) if equity shares are bought below the maximum buyback price of ₹250.


Through the buyback, HPCL’s minority shareholders are looking to get rewarded. The company will finalise the details of the buyback in the next two days.

Strong profit growth is the secondary driver

The second-quarter net profit of HPCL more than doubled on the back of a surge in refining margins and inventory gains — which is again the other major reason behind HPCL stock rise today.

Net profit in July-September came at ₹2,477 crore as compared to ₹1,052 crore a year back, HPCL Chairman and Managing Director Mukesh Kumar Surana told the media on a conference call.

“The significant improvement in the profitability in spite of challenges including lockdown due to COVID-19 pandemic was a result of strategic planning in refinery and marketing operation, containing the degrowth to less than the industry, efficient inventory management and effective production placement,” he said.

Cheaper crude oil contributed to strong growth

The gross sales revenue stood at ₹61,340 crore and was lower than ₹66,165 crore of Q2 of the previous financial year due to lower oil prices. The firm earned $5.11 on turning every barrel of crude oil into fuel in the second quarter of 2020-21 fiscal as compared to a gross refining margin of $2.83 a barrel. This included a $2.33 per barrel inventory gain from buying cheaper crude oil earlier and processing in Q2. This translated into ₹1,780 crore of gain. Besides, the firm also had a forex gain of ₹524 crore, he said.

The company said during the quarter, 303 new retail outlets were commissioned taking the total retail outlet network to 17,171 as of September 2020. HPCL also commissioned 37 new LPG distributorships during the quarter, taking the total LPG distributorships to 6,153 as of September 2020.

(with inputs from wire services)

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