Bharat Petroleum Corporation Limited (BPCL) saw its share price increase by 2% during early trading on 28 October 2024, following the announcement of a joint venture (JV) agreement with Oil India ltd (OIL) for city gas distribution. At 09:24 am, BPCL's shares were trading at ₹312.10, up by ₹6.15, or 2.01%, on the Bombay Stock Exchange (BSE).
BPCL's joint venture with Oil India for city gas distribution
The BPCL board approved the JV with Oil India on 25 October 2024 as part of its strategy to expand its city gas distribution (CGD) network in India. The joint venture aims to develop CGD projects in Arunachal Pradesh, where the new entity will handle the supply, distribution, and marketing of Compressed Natural Gas (CNG), Piped Natural Gas (PNG), Liquefied Natural Gas (LNG), and related retail services.
The companies will hold equal stakes, with a 50-50 ownership structure in the JV company, ensuring a balanced partnership. According to BPCL, the formal agreement will be finalised after obtaining the necessary regulatory approvals.
Financial structure of the proposed joint venture
The authorised share capital for the new joint venture company (JVC) has been set at ₹125 crore, consisting of 12.5 crore shares valued at ₹10 each. This share capital may be increased in the future based on additional investment needs. The initial issued, subscribed, and paid-up capital will be ₹5 crore, allowing the JV to commence its operations effectively.
Despite the announcement of the JV, BPCL decided not to pursue a capital raise through a rights issue, as discussed during its board meeting.
BPCL's recent financial performance
BPCL's share price boost comes despite a challenging second quarter for the financial year 2024-25. The company reported a 72% year-on-year decline in consolidated net profit, amounting to ₹2,297 crore. At the same time, its revenue from operations remained relatively unchanged at ₹1.18 lakh crore compared to ₹1.17 lakh crore in the previous year.
The joint venture with Oil India is a strategic move to strengthen BPCL's position in the CGD sector, potentially boosting investor confidence in the company's long-term growth prospects. Those looking to buy shares online may find this a promising development, as BPCL is making efforts to expand its business into new areas of growth.
What does the joint venture mean for the city gas distribution sector?
The partnership between BPCL and Oil India aligns with the government's push towards increasing the use of natural gas in India's energy mix. The development of CGD infrastructure in Arunachal Pradesh is expected to enhance the availability of cleaner fuel options for domestic and industrial use, contributing to the country's energy transition.
Investors keen to buy shares online can view this joint venture as a step towards enhancing BPCL's portfolio and tapping into emerging opportunities in the CGD market.
Key takeaway for investors considering BPCL shares
The 2% rise in BPCL's share price reflects positive investor sentiment towards the joint venture agreement, which could bring long-term growth for the company. This development, coupled with the company's steady revenue from operations, indicates BPCL's resilience in the face of declining profits.
For those planning to buy shares online, the collaboration with Oil India may offer a promising investment opportunity, as it positions BPCL to capture growth in the expanding CGD sector.
Conclusion
BPCL's joint venture with Oil India marks a significant step forward in its strategy to diversify and grow its business in the city gas distribution sector. With plans to enhance the distribution network for natural gas in Arunachal Pradesh, the JV could provide a new revenue stream for BPCL, making it an appealing choice for investors aiming to buy shares online.
For android only