3 EoIs for BPCL, says Dharmendra Pradhan; financial bids in February

The government has received ‘three preliminary bids’ for its controlling stake in India’s second-largest fuel retailer Bharat Petroleum Corporation (BPCL), petroleum minister Dharmendra Pradhan said on Wednesday. Department of investment and public asset management (Dipam) secretary Tuhin Kanta Pandey told FE that short-listing of firms from the preliminary bids have been done after scrutiny by the transaction advisor. Financial bids are expected in February, he added.

The last date for submission of expression of interest (EoI) was November 16.

Vedanta, India arm of Anil Agarwal-controlled Vedanta group, is the only firm to have confirmed presence at the EoI stage of the BPCL sale process. PTI reported on Wednesday that two global funds, including Apollo Global Management, are “said to be” in the fray.

“The shortlisted firms will be given data room access and contracts copy, sign confidential undertaking, field queries, look at the assets and might visit some of the facilities of BPCL.. All the painstaking work is now beginning,” Pandey told FE.

The stake sale, expected to be completed this fiscal was earlier seen to fetch around `70,000 crore to the exchequer. The BPCL sale is likely to be single largest component of the Centre’s disinvestment receipts this fiscal, which is likely to be far below the ambitious Rs 2.1 lakh crore budgeted.

The government’s stake in BPCL was worth about Rs 60,000 crore in November 2019, around the time the stake sale proposal was approved by the Union Cabinet. However, the actual receipts will depend on valuation and consideration of a premium (ONGC had bought the Centre’s stake in HPCL in FY18 at a premium of 14% to the stock’s price). As per the Sebi takeover code rules, an acquirer company has obligation to launch a mandatory open offer for an additional 26% stake in the target company.

The BPCL stock closed at Rs 384.45 on the BSE on Wednesday, up 1.4% from previous closing price. Vedanta share price rose 2.1% to close at Rs 124.1 during the day.

BPCL owns and operates four refineries in India and 15% share of the country’s 250 million tonne refining capacity; it also has 17,000-strong retail fuel outlet network in the country, and a over quarter of the retail market share. Its privatisation is seen as critical for the government to boost its non-debt capital receipts this fiscal, when all revenue streams are faltering due to deep economic slump caused by Covid-19 pandemic.

Vedanta, part of London-headquartered Vedanta Resources, having a diversified business portfolio straddling minerals and energy, had acquired a 58.5% stake in Cairn India for $8.67 billion in 2011. Vedanta Group had acquired majority stake in Bharat Aluminium Company (Balco), then a PSU, in 2001; it has also over the years acquired a controlling stake in Hindustan Zinc, starting with 26% stake it bought in 2002-03. A Supreme Court decision is being awaited on the sale of the government’s residual stakes in these companies.

Private firms have a share of over a quarter of the country’s crude oil output, more than 90% it comes from Vedanta-owned Cairn assets in Rajasthan, Andhra Pradesh and Gujarat. The remaining 74% domestic crude is produced by state-run ONGC and Oil India. To be sure, about 85% of the India’s crude oil needs are still met by imports.

BPCL operates four refineries in India, Mumbai Refinery, Kochi Refinery, BORL-Bina Refinery (Bharat Oman Refineries Limited, a joint venture between BPCL and Oman Oil Company) and Numaligarh Refinery with a combined crude oil refining capacity of 38.3 million tonnes per annum. BPCL’s stake in Numaligarh refinery will be sold to another CPSE oil firm separately.