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BPCL stake sale draws international interest
FINANCE & INVESTMENT
SOME of the world’s biggest oil companies are reportedly interested in the Indian government’s plans to privatise its controlling stake in Bharat Petroleum Corporation Ltd (BPCL).
Indian financial daily Livemint quoted two unnamed sources on October 20 as saying that state-owned giants Saudi Aramco, Rosneft, Kuwait Petroleum and Abu Dhabi National Oil Co. (ADNOC) were in the mix alongside inter- national oil companies (IOC) such as ExxonMo- bil, Royal Dutch Shell and Total.
“While a formal interest from the potential bidders is expected in due course, all the above names are part of the list that the government will reach out to,” one of the sources said.
Privatisation plans
The government is hoping to raise at least of a third its 2019-2020 divestment target of INR1.05tn ($14.8bn) from the sale of its 53.29% stake. Some estimates have valued the stake at upwards of INR600bn ($8.46bn).
The refiner is considered an attractive invest- ment target, give its share of the Indian down- stream. BPCL has 38.3mn tonnes (770,000 barrels per day) of refining capacity, owns more than 15,000 retail fuel stations and has a network of 6,000 LPG distributors. India, meanwhile, has 249.4mn tonnes (5mn bpd) of refining capac- ity, over 65,500 fuel stations and 24,000 LPG distributors.
“[BPCL’s] downstream business is quite promising and is the most professionally run organisation among oil marketing companies. It is a good bet for any company that plans to have a footholdintheIndianmarket,”Livemintquoted one of its sources as saying.
“DIPAM [The Department of Investment and Public Asset Management] will appoint an adviser and a valuer in November. The valuation report is expected to be submitted in 50 days,” according to another.
On September 30, a group of secretaries gave the government the green light to sell its entire stake in BPCL. The government repealed 187 laws in 2016, including the Act of 1976 that related to the nationalisation of BPCL forerun- ner Burmah Shell.
Technical bids by potential advisers and val- uers will reportedly be opened on November 4, with presentations by eligible bidders to be held within a week and shortlisted bids to be opened shortly thereafter. While the government is look- ing to wrap up the sale by the end of the financial year, protests by the company’s workers could derail the process.
BPCL’s unions are reportedly in industrial action to coincide with the parliamentary winter
session. General secretary of Cochin Refinery Workers’ Association M G Aji told BusinessLine that three of Kochi City’s four recognised unions had formed a joint action committee to organise the strike. He said a meeting would be held in Mumbai on October 26 to announce the time- table for action.
Workers might be appeased if the govern- ment opted to sell its stake to another state-run company, but this is unlikely to happen.
HPCL for sale?
State-run Oil and Natural Gas Corp. (ONGC) bought the government’s 51.11% stake in Hin- dustan Petroleum Corporation Ltd (HPCL) for INR369.15bn in January 2018.
The goal of the sale, in addition to allowing the state to meet its divestment target, was to cre- ate a large integrated oil major that could weather uncertainties in the global oil market. When oil prices were high, ONGC’s upstream focus would offset the increased pressure on HPCL’s refining margins,andviceversa.
Indian media, however, has been reporting for months that the two companies have strug- gled to integrate successfully since the takeover. After almost two years of majority ownership, ONGC has only been able to appoint one mem- ber to HPCL’s board.
Moreover, when the government sold its stake in the refiner to ONGC, it was criticised for only securing an 18% premium. Market observ- ers said the stake could have fetched a signifi- cantly higher price if HPCL had been privatised.
It now appears to be the time for ONGC to privatise the stake in HPCL, with Minister of Petroleum and Natural Gas Dharmendra Pradhan telling reporters on October 14 that such a divestment was a “market decision”. He added: “They [ONGC, HPCL] are autonomous companies. They are free to take their own deci- sion at the appropriate time.”
The legislation covering HPCL’s nationalisa- tion is understood to be one of the 187 laws that were repealed in 2016.™
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w w w . N E W S B A S E . c o m Week 42 23•October•2019