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Why Samir Arora went against his investment philosophy for this company

Market veteran Samir Arora has invested in HPCL due to its cheap valuations. At the current price of Rs 284, HPCL commands at a market-cap of Rs 40,000 crore.

July 05, 2023 / 14:10 IST
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Samir Arora
Samir Arora maintains that having a flexible mindset is key to investment success.

Celebrated fund manager Samir Arora said he has invested in oil and gas company HPCL due to incredibly cheap valuations, in an exclusive interview with Moneycontrol on July 5. HPCL is a state-owned oil refining and marketing company. The stock was trading nearly 2 percent higher at Rs 283.60 at 12:30pm on July 5.

“I bought it based on one comment from my analyst who said that it was incredibly cheap – the company was quoting at a market-capitalisation lower than that of Zomato,” he said. Arora had bought Zomato around Rs 50 levels, when the market-capitalisation was roughly around Rs 40,000 crore. Currently, at Rs 74, Zomato enjoys a market-cap of Rs 62,000 crore. On the other hand, at the current price of Rs 284, HPCL commands at a market-cap of Rs 40,000 crore.

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In FY23, Zomato clocked sales of Rs 7,079 crore and net loss of Rs 970 crore while HPCL clocked revenue of Rs 4,40,000 crore and net loss of Rs 9,471 crore. But Arora sees the profitability equation change for HPCL.

Oil refining companies have been under pressure and making losses because they do not have full flexibility to price petrol and diesel. When crude prices were climbing higher they were unable to fully pass on the price hikes to consumers, so they incurred losses. Plus, they also incur some bit of losses on subsidised products like Kerosene. But this year may be different as crude prices have settled lower but prices of petrol and diesel have been maintained at higher levels which means companies will make profits.