OMC Stocks Gain Up To 7% On September 29 After Minister Calls for Higher Valuations

Shares of oil marketing companies rallied on Monday, September 29, following remarks by Union petroleum minister Hardeep Singh Puri according to news reports. HPCL, BPCL, IOC, and MRPL gained as much as 7% intraday. The minister highlighted that these firms contribute significantly to corporate profits but remain undervalued in market terms. His comments triggered strong interest across oil and gas counters.

Minister’s Pitch for Higher Valuations

Puri underlined that the three major OMCs, IOC, BPCL, and HPCL, generated 3.3% of corporate India’s profit last year. Despite this, their combined market value stands at less than 1%. “So, we believe that we are undervalued,” Puri said, urging investors to reassess these stocks. He further added that government policy is now less interventionist, with greater focus on capex quality and value unlocking.

The minister reaffirmed the government’s commitment to a stable energy pricing framework. He stressed that long-term shareholder value would be driven by structural reforms rather than price controls. Puri also noted that 15% of management pay is linked to share price returns alongside profitability. This, he said, strengthens accountability and aligns leadership with investor interests.

Current Valuations in Perspective

Valuations of oil and gas firms have become a central discussion point in the market. Here is how the forward price-to-earnings multiples compare with their 5-year averages:

The overall market capitalisation of the Nifty oil and gas index is pegged at ₹30.23 lakh crore. Its aggregate price-to-earnings ratio currently stands at 11.8 times. The index has delivered a compound annual growth rate of 15.3% over the past decade, underlining sector resilience.

Value Unlocking Opportunities

Several value unlocking measures are being planned across the sector. IOC and GAIL are preparing to list pipeline infrastructure investment trusts (InvITs). These moves will help monetise crude oil, petroleum, and natural gas pipeline networks. HPCL is evaluating the demerger of its lubricants business, while GAIL is exploring a demerger and separate listing of its city gas distribution arm, GAIL Gas.

Such structural steps could help boost valuations and draw fresh investor interest. Analysts suggest that the combination of stable policies, monetisation initiatives, and strong balance sheets can enhance the long-term profile of these companies. With energy security and diversification at the forefront, OMCs are expected to remain key players in India’s market.

Conclusion

OMC stocks gained sharply on September 29 after the minister’s comments on valuations and governance reforms. The comparison with historic multiples shows that many oil and gas firms are trading below long-term averages. Upcoming InvIT listings and business demergers could provide additional triggers for value creation. With stable policies in place, the sector is positioned for sustained investor attention.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.