What a difference a year can make!
In late-November 2019, as the Union Cabinet had cleared the privatisation of Bharat Petroleum, along with other state-owned companies like Concor and Shipping Corp, there was much optimism in the government regarding what could have been a blockbuster deal.
Around the time, the centre’s 53.3 per cent stake in the oil marketing behemoth was valued at around Rs 59,000 crore. Internally, multiple officials in the government were hopeful of a 20-30 per cent premium, given its strong fundamentals, oil marketing network and the attractiveness of other core businesses like refining, pipeline and petrochemicals.
In off-record conversations with reporters, they would speak about BPCL privatisation likely fetching the government close to Rs 80,000 crore. It was said that this was a golden opportunity for the likes of Saudi Aramco, Rosneft, Total and Exxon Mobil to tap the huge Indian retail market for petroleum products.
A global pandemic and an economic slowdown later, things don’t look quite so rosy. And though the government has said it has received a number of expressions of interest and will not extend the dates for submitting the same, it is still some time before clarity emerges on whether a deal to privatise BPCL can be finalised or not.
“Though we have moved on to the next stage, there is still some way to go before a buyer can be identified. The privatisation certainly won’t happen this fiscal year,” a senior government official told Moneycontrol
On November 17, BPCL shares closed 4.4 percent lower. That would value the centre’s 53 per cent stake at around Rs 45,000 crore. And this time around, officials aren’t even remotely willing to hazard a guess on what sort of premium the government would get on its stake.
A second official told Moneycontrol the transaction advisor Deloitte will take around 15 days to study the expressions of interest and gauge their eligibility. This will be followed by confidentiality agreements being signed with the eligible bidders and BPCL’s books being opened to them. This process is expected to last 2-3 months after which bidders will place their financial bids.
“Only when the interested investors place their bids will we have a sense of the enterprise value of BPCL,” said the official, adding that the entire process could take upwards of six months.
Moneycontrol has learnt that a number of global oil giants like Reliance, its partners Aramco, Rosneft and others have not submitted EOIs, and hence, are not interested for the time being. A PTI report had said private equity and pension funds have expressed interest in BPCL.
For the eventual buyer of BPCL, around 35.3 million tonne of refining capacity, 16,492 retail outlets, and 72 million LPG customers will be on offer.
The government's plan is to sell its entire shareholding in BPCL comprising 1.15 billion equity shares, with the transfer of management control to a strategic buyer, excluding the company's 61.65 per cent in the Numaligarh Refinery in Assam.
The stake in Numaligarh refinery is expected to be sold to another public sector undertaking. A consortium of Oil India and Engineers India has shown interest in taking up BPCL’s 48 per cent stake in Numaligarh. The remaining stake would be sold to the government of Assam, to increase the state's share to 26 per cent in the venture.