Govt looking to sweeten BPCL sale
Centre is also looking to allow BPCL to sell its stake in Petronet LNG and Indraprastha Gas Ltd, where the oil refiner is one of the promoters, before its own strategic sale
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The central government proposes to further sugarcoat the BPCL strategic sale deal for the interested investors by giving few more clarifications through a new set of frequently asked questions (FAQ).
Sources said that the Department of Promotion of Investment and Internal Trade (DPIIT) may soon issue a clarification that the BPCL under new private sector owners would be free to bring in foreign direct investments (FDIs) to the tune of the entire 100 per cent equity of the company without conditions.
Also, after privatisation, BPCL would be free to exercise its right to stay or come out of the joint venture company that plans to build the world's largest 60 million-tonne integrated refinery-cum-petrochemicals complex in Maharashtra's Ratnagiri district at an estimated cost of Rs 3 lakh crore.
Moreover, the government is also looking to allow BPCL to sell its stake in Petronet LNG and Indraprastha Gas Ltd, where the oil refiner is one of the promoters, before its own strategic sale.This will prevent new owners of BPCL from making mandatory open offers to the shareholders of these companies, an exercise that could increase the cost for the new investors by up to Rs 20,000 crore.
"The aim is to conclude the BPCL strategic sale this year. We have also received decent interest from the investors for whom the company's data room has been opened before the financial bids are invited. A few more clarifications would make the sale process even more attractive for the investors and provide higher valuations for the government stake," said an official source not willing to be named.
The government is selling its entire 53.29 per cent stake in BPCL to a strategic investor to mobilise over Rs 52,000 crore as disinvestment receipt. Though started in 2019 when its disinvestment got nod, BPCL's disinvestment has been postponed on numerous occasions due to the pandemic related disruptions.It is understood that along with domestic oil and gas and metal company Vedanta, Apollo Global Management and Think Gas (promoted by I Squared Capital) are reportedly among the interested parties.
Though the government says that multiple bids have been received, major energy giants, including Reliance Industries, Saudi Aramco, the UAE's Adnoc and the UK's BP, have not placed interest for the state-run oil major so far.This has made the task difficult for the Centre, which is looking to retain investor interest to conclude the deal this year. The proposal to clarify 100 per cent FDI permission for the new owners of BPCL is required as the refiner is a PSU company right now where only up to 49 per cent FDI is permitted.
Experts say that this clarification is essential as the government already allows 100 per cent FDI in the oil and gas sector and the case for BPCL should be no different after it gets converted into a private entity.The freedom to decide investment in the proposed Ratnagiri refinery could allow the bidders to place aggressive bids as it would reduce liabilities for the new owners who could decide the future of BPCL on their own terms.
The most important decision would be to allow BPCL to exit PLL and IGL before sale and save almost Rs 20,000 crore for the new owners.Some of the interested qualified investors have also sought exemption from open offer to the shareholders of BPCL post its privatisation. This could save another Rs 25,000-30,000 crore for the investors.
But no call has been taken in this regard so far, sources said. BPCL operates four refineries in Mumbai, Kochi, Bina (Madhya Pradesh) and Numaligarh (Assam), but the facility in Assam has been hived off.The company accounts for 15 per cent of India's refining capacity of close to 250 million tonnes.
The public sector company also owns 15,177 petrol pumps, 6,011 LPG (liquefied petroleum gas) distributorships and 51 LPG bottling plants.BPCL distributes 21 per cent of the petroleum products consumed in the country and owns a fifth of the 250 aviation fuel stations in India.
The government targets Rs 1.75 lakh crore through disinvestments during FY 2021-22, with BPCL expected to provide a large portion of this amount.Despite being a good takeover target, the company sale plan had to be postponed on several occasions since March 2020. The concern now is that the pandemic should not result in distress sale of this valuable government asset.
