Privatisation will unlock tremendous value for BPCL: CMD K Padmakar

As the government seems to be racing against time to conclude the privatisation of state-run oil-refiner-and-marketer BPCL in the current fiscal itself, its chairman and managing director K Padmakar said on Monday that the imminent transaction “will unlock tremendous value for the company and increase professionalism, efficiency, technology and product diversification”.

He told the company’s AGM said that, “there has been substantial (positive) changes about the perception on privatisation in the minds of the employees since the first announcement on divestments was made by the government last year”.

The government has recently discounted the fears that the transaction may spill over to the next fiscal; minister of state for finance Anurag Singh Thakur told the Lok Sabha on September 19 that, “The transaction is expected to be completed in the current financial year.”

Analysts at Jefferies have recently wrote that, “analysis of Exxon and Shell’s Asia businesses suggest a well-recognised brand as a potential owner (of BPCL) could usher in faster growth, operating leverage gains, and cost savings over the medium term”. MNC fuel retailers in India and South East Asia enjoy faster growth and their throughput per outlet is two to three times higher than their domestic peers, they noted.

The Centre is banking on the sale of its entire 52.98% stake in BPCL along with a clutch of other transactions to minimise a likely shortfall in its non-debt capital receipts from the budgeted level in the current fiscal. Though precise valuation is not available and will depend on market vagaries, the BPCL sale is expected to fetch the government around Rs 80,000 crore, which is equal to 40% of the FY21 disinvestment target of Rs 2.1 lakh crore.

Like most other CPSE stocks, BPCL share price has also been adversely affected in recent months. The BPCL stock declined 28% between October 3, 2019, (Rs 531.9) and September 28, 2020 (Rs 384.7). The latest deadline for accepting expressions of interest (EOIs) for the BPCL stake from potential buyers is September 30. The initial deadline for EOI was June 13, but it was extended multiple times due to the Covid-19 pandemic.

BPCL director, finance, N Vijayagopal said all queries of potential bidders have been addressed and the request for proposal for the stake sale is expected to be floated after the government goes through the vetting process of documents received from the bidders, which approximately take about two weeks.

BPCL’s net profit on a standalone basis increased 93% annually to Rs 2,076.2 crore in Q1FY21 on the back of high auto fuel margins, refining margins and inventory gains. The company had reported a net loss of Rs 1,361 crore on a standalone basis for the three months ended March 31, against a profit of Rs 3,125 crore in the same period a year ago, mainly on the back of inventory losses of Rs 4,900 crore (against inventory gain of Rs 3,560 crore in Q4FY19) stemming from decrease in global oil prices.

Vijayagopal said that, out of the 9.3% treasury shares that BPCL Trust for Investment holds, 2% will be transferred to employee stock purchase scheme (ESPS). He, however, added that no decision has yet been taken on what is to be done with the remaining 7.3%.