BPCL privatization: Bid closes on Monday, all eyes on Reliance

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BPCL privatization: Bid closes on Monday, all eyes on Reliance

Division of Funding and Public Asset Administration (DIPAM) Secretary Tuhin Kanta Pandey had final month advised PTI that there could be no additional extension

Preliminary bids for privatization of Bharat Petroleum Corp Ltd (BPCL) will shut on Monday amid indications of supermajors UK’s BP Plc, Complete of France, and Saudi Aramco unlikely to bid.

The federal government, which is promoting its whole 52.98% stake in India’s second-largest oil refining and advertising and marketing firm, had on 4 events prolonged the date of placing within the preliminary expression of curiosity (EoI). The present deadline is November 16.

Division of Funding and Public Asset Administration (DIPAM) Secretary Tuhin Kanta Pandey had final month advised PTI that there could be no additional extension.

Business sources mentioned BP in addition to Complete are unlikely to bid for the stake and there are experiences of even Russian power big Rosneft or its associates and Saudi Arabian Oil Firm (Saudi Aramco) not very eager on bidding given the asking worth of near $10 billion required to purchase the agency at a time when the world is shifting away from typical gasoline.

Additionally, the pandemic has led to the demand destruction of typical fuels and should hasten transition in direction of cleaner fuels reminiscent of hydrogen and battery-operated EVs.

Given the unsure demand state of affairs, the buyers are weighing if BPCL acquisition is smart, they mentioned.

At Friday’s closing worth of ₹412.70 on the BSE, the federal government’s 52.98 percent stake in BPCL is value ₹47,430 crores. Additionally, the acquirer must make an open supply for purchasing one other 26% stake from the general public, which might price ₹23,276 crores.

Sources mentioned BPCL yearly makes a revenue of about ₹8,000 crores and at this tempo, it could take 8-9 years for the investor to get well the bid quantity of over ₹70,000 crores.

The acquisition is smart for firms that might double the revenue by raising the enterprise in addition to operational efficiencies and synergies with the present enterprise in half that timeframe.

Billionaire Mukesh Ambani-led Reliance Industries Ltd., which operates the world’s largest single-location oil refining advanced at Jamnagar in Gujarat and has fledgling ambitions to retail gasoline, might be one such firm.

Reliance has to date remained tight-lipped about its intentions for BPCL.

Reliance, which had not too long ago employed former BPCL chairman Sarthak Behuria, just a few weeks again obtained former Indian Oil Corp (IOC) chairman Sanjiv Singh. The 2 hires may very well be linked to its need to bid for BPCL, sources mentioned.

Sources mentioned it makes enterprise sense for Reliance to mix its Jamnagar refineries with BPCL’s Mumbai, Kochi, and Bina models, in addition, to merge its 1,406-plus gasoline stations with 17,138 petrol pumps of BPCL.

The identical logic additionally applies for Rosneft-led Nayara Power, which operates a 20 million tonnes oil refinery at Vadinar in Gujarat and in addition has 5,822 petrol pumps. However, experiences indicated Rosneft not eager on bidding for BPCL.

Rosneft CEO Igor Sechin had in February this yr had indicated the Russian big’s curiosity in BPCL however it’s now eager solely on the advertising and marketing infrastructure of the corporate and never its refineries.

Abu Dhabi Nationwide Oil Co (ADNOC) may very well be one other potential bidder given its keenness to increase into the world’s quickest rising gasoline market.

Mining billionaire Anil Agarwal is taken into account one other potential bidder given his curiosity within the oil and fuel enterprise with the $8.67 billion acquisition of Cairn India.

However, buyers whereas deciding on bidding must weigh rigid places of BPCL’s oil refineries in addition to robust labor legal guidelines towards entry to the world’s fastest-growing gasoline market.

The $10 billion worth would give purchaser possession of BPCL’s three refineries — Mumbai, Kochi in Kerala, and Bina in Madhya Pradesh — 17,138 petrol pumps, 6,151 LPG distributor businesses, and 61 out of 256 aviation gasoline stations within the nation.

The nationwide readymade gasoline retailing community that controls 22% market share is essentially the most profitable part of the deal, a supply conscious of the bidding course mentioned.

However the firm’s refineries are at rigid places notably those at Mumbai and Kochi the place getting further land for growth or petrochemical unit additions could be close to unattainable, the supply mentioned.

Additionally, India’s robust labor legal guidelines pose one other problem as any overseas or personal operator could be desirous about working the corporate on a leaner workforce and never with almost 12,000 robust worker base.

One other supply mentioned BPCL’s community of petrol pumps is being seen as a profitable bait for buyers however as soon as the present lease for shops expires or a change of land use is allowed, operators of petrol pumps would in huge cities use the websites for different companies that give a greater return.

BPCL doesn’t make a lot of sense to BP and Complete who’ve made an acutely aware shift in direction of cleaner power sources reminiscent of fuel and renewables and haven’t been including refineries, a supply mentioned.

ExxonMobil can also be being talked about as a possible bidder however the firm is claimed to face its personal monetary issues.

BPCL will give patrons prepared entry to 15.3% of India’s oil refining capacity and 22% of the gasoline market share on this planet’s fastest-growing power market.

Privatization of BPCL is important for assembly the report ₹2.1 lakh crore goal the finance minister has set from disinvestment proceeds within the finances for 2020-21.

BPCL operates 4 refineries in Mumbai (Maharashtra), Kochi (Kerala), Bina (Madhya Pradesh), and Numaligarh (Assam) with a mixed capability of 38. Three million tonnes each year, which is 15.3% of India’s whole refining capability of 249.Eight million tonnes.

Whereas the Numaligarh refinery might be carved out of BPCL and bought to a PSU, the brand new purchaser of the corporate will get 35.Three million tonnes of refining capacity.

The bidding might be a two-stage affair, with certified bidders within the first EoI part being requested to make a monetary bid within the second spherical. Public sector undertakings (PSUs) should not eligible to take part in the privatization.

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