OMCs valuations seem full

The government had not issued any oil bonds and that has raised serious concerns regarding the delay in the issue of oil bonds. However, the
finance secretary's statement on compensating the OMCs in cash instead of oil bonds if implemented will be a positive and is expected to allay the concerns related to the intention of the government with regard the OMC compensation.

The positive indications from the government on the subsidy front, the hike in automobile fuel prices and the oil moving in a narrow band for sometime have led to a steep run-up in the stock prices of the OMCs. Since April 01, 2009, IOCL, BPCL and HPCL are up.

Hence, at the current market price, it is believed that the valuation of the OMCs seems full. We highlight here that any development or any notification from the government related to the de-regulation of the automobile
fuels could result in the re-rating of the OMCs.