The planned $6.5 billion sale of the government’s 53% stake in refiner Bharat Petroleum Corp., India’s first big-ticket transaction in over a decade, has lured several global oil majors. Funds including Jupiter Asset Management Ltd. and Smartsun Capital Pte. say a change in ownership can reignite demand for the category whose valuations have only shrunk since early 2010.

“Strategic sales, like the one happening in BPCL, will mark a turning point for stocks of state-owned enterprises,” said Sumeet Rohra, a fund manager at Smartsun, which has raised its shareholding in the refiner and Hindustan Petroleum Corp. this year.

BPCL is the centerpiece of Modi’s $28 billion privatization drive aimed at replenishing coffers depleted by sluggish tax revenue and dole outs to shield the poor from the coronavirus fallout. There are concerns over whether the plan is achievable, given the nation’s track record of having met the asset-sale target only twice in the past nine years.

On Wednesday, the government extended the deadline to receive initial bids for the refiner by two months to Sept. 30. This was the third extension after the administration failed to complete the sale of BPCL — and flag carrier Air India Ltd. — in the year ended March.

The last big-ticket sales of major companies to private players was in 2002 when India Petrochemicals Co. was sold to Reliance Industries Ltd.. a unit of Vedanta Ltd. bought majority stake in Hindustan Zinc Ltd. and Suzuki Motor Corp. gained management control in Maruti Suzuki India Ltd.

Investors have been skeptical of state firms in their current form and that explains the latter’s under-performance on the stock markets. The S&P BSE PSU Index has trailed the S&P BSE Sensex in all but two years since the global financial crisis. And its valuation is near the lowest on record relative to the Sensex.

A successful change in ownership of state firms, starting with BPCL, can help reverse the trend, said Avinash Vazirani, London-based fund manager for emerging markets at Jupiter Asset. The fund has recently raised its exposure to the refiner, he said.

The market value of Hindustan Zinc has surged more than 100 times to about $12 billion since its sale, while Maruti Suzuki’s shares have appreciated about 50 times since their debut in 2003. Investors including Chokkalingam G, chief investment officer of Equinomics Research & Advisory Ltd., are counting on history repeating itself.

“A true strategic sale of a large company will indicate the government’s commitment to reform, not just on the privatization side but also on matters like labor laws, land laws and the judiciary,” he said. “This could result in a re-rating for other PSUs.”

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