Unlike KRL which is making healthy profits, Bongaigaon is trudging along slowly. But a healthy bottomline is still quite far away and analysts speculate that Bongaigaon may become a drain on IOC's resources. While it is a foregone conclusion that the government's stake in the refineries will be sold, the price that is paid could be the only redeeming factor in the deals. In the BPCL-KRL deal, BPCL shelled out Rs 6.59 billion for 55.04 per cent in Kochi Refineries at Rs 86.85 per share. While it is buying CPL at a price of Rs 65.92 per share, BRPL is being bought at Rs 10 per share.
Valuations play a critical role in any deal.
And the price paid for Kochi Refineries has been 60 per cent greater than what the market values it at. On March 23, the KRL stock closed at Rs 50.10. In India, we are already projecting a surplus in refining in a few years. So, the valuation is probably the most important part of the deal, as it makes one understand whether the deal was worthwhile or not. BPCL pooh-poohs any criticism of the price paid for Kochi Refineries.