The country's largest public
sector refiner and retailer, Indian Oil Corporation (IOC), may consider
bidding for the Centre's stake in Bharat Petroleum Corporation Ltd
(BPCL) if such a need arises and the government agrees to reduce the
quantum shares on offer in the company, including a waiver from
mandatory open offer.
Top official sources said that BPCL would
fit well into the scheme of things of IOC, and together the entity would
become a powerhouse of refining and retailing activity, which would
give tough competition to other players in the field, including the
global giants eyeing the Indian market.
When asked recently, IOC
Chairman Rajiv Singh did not deny IOC's interest in BPCL, but said:
"These are big offerings where the Government of India's entire stake is
Though the government is keen to offer its entire
53.29 per cent stake in BPCL to a strategic investor, most likely a
global oil and gas giant such as Aramco, it has kept other options ready
in the form of possible interest from companies such as IOC.
sources said that there is a fear that no company, including global
majors, may commit to invest close to Rs 1 lakh crore required to
complete the transaction at one go. So, if the BPCL stake sale does not
evince interest from MNCs, as an alternative, the government may sell
half or around 26-27 per cent of its share to another PSU such as IOC.
regulator Securities and Exchange Board of India (Sebi) may also extend
a waiver from the mandatory open offer to minority shareholders of BPCL
as it had done in the case of ONGC, picking up the entire government
stake in HPCL and Power Finance Corporation's (PFC) acquisition of
government stake in REC.
The Department of Investment and Public
Asset Management Disinvestment (DIPAM) has already started the process
of appointing advisors for the sale of the entire government stake in
While the mandate of advisors is to come up with a fair
valuation of BPCL, identify investors and close the deal, sources said
they may also present two scenarios -- one where 53.29 per cent stake is
sold to a strategic investor, and the other where a strategic investor
will pick up half of this stake but take management control by virtue of
having the largest shareholding.
In the second scenario, the
government will continue with a holding of up to 26 per cent stake in
BPCL, a portion of which it might dilute when the strategic investor
comes up with an open offer. It may also keep a portion of the holding
for sale at a later stage at a higher valuation after the investor pumps
in money into the company and lets it grow.
stake is worth over Rs 60,000 crore at the prevailing price of BPCL
shares on the BSE. If the buyer has to further acquire 25 per cent share
in an open offer as per the takeover code, the total amount will rise
to close to Rs 1 lakh crore. This is considered too high even by
On its part, DIPAM is working out a plan
to offload the entire government equity to a strategic partner,
possibly a large overseas oil entity such as Saudi Aramco, Total,
ExxonMobil or Shell. However, with the oil market globally facing a
slowdown and demand not picking up despite supply squeeze, the appetite
for a large acquisition becomes difficult.
While no Indian
company looks like mobilising such huge funds for BPCL's acquisition,
industry experts hinted that companies from Russia and the Gulf region
could be targeted to get the necessary investment. This, sources said,
could be done through government-to-government talks as most oil
companies in those regions are state controlled.
BPCL will be an
attractive buy for companies ranging from Saudi Aramco of Saudi Arabia
to French energy giant Total SA, which are vying to enter the world's
fastest-growing fuel retail market, including entry in retail space
where BPCL has significant presence.
government could also keep other oil PSUs such as IOC and OIL India on a
standby to go in for share buybacks if strategic sale to a private
partner meets with little success.
BPCL operates four refineries
in Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in
Assam with a combined capacity to convert 38.3 million tonnes of crude
oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors.
government proposes to raise Rs 1.05 lakh crore from disinvestment in
the current financial year. It had exceeded asset-sale targets of Rs 1
lakh crore in FY18 and Rs 80,000 crore in FY19.
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