Exclusive | BPCL privatisation may be further delayed over open offer to Petronet, IGL shareholders

Privatisation of Bharat Petroleum Corporation (BPCL) is likely to be delayed by another six months as the government is trying to resolve the issue of mandatory open offers that the winning bidder will have to make to companies promoted by the oil major, which may raise the acquisition cost by Rs 20,000 crore, sources familiar with the development said.

The company is already in the process of seeking an exemption for the successful bidder from mandatory open offer to be made to shareholders of Petronet LNG and Indraprastha Gas Ltd., in which BPCL is a promoter.

According to a source, the government is unlikely to favour an exemption for BPCL, unlike the case when Oil and Natural Gas Corporation (ONGC) acquired Hindustan Petroleum Corporation Ltd (HPCL) it was exempted from making an open offer to minority shareholders because both firms had the same promoter, the government of India.

BPCL holds around a 12.5 percent stake in Petronet LNG and 22.5 percent in IGL. A source said the government may be in favour of the company equally selling its stake to other public sector undertakings in Petronet – including Indian Oil Corporation (IOC), Gail India and ONGC, all holding 12.5 per cent each. The government is keen on BPCL giving away its promoter status in these two companies, he said.

If BPCL remains a promoter of Petronet and IGL, the private entity that acquires the government’s stake will have to make an open offer for another 26 per cent stake in both the companies as per the Securities and Exchange Board of India (Sebi) guidelines. This is likely to raise the acquisition cost of BPCL by Rs 20,000 crore, which may discourage potential bidders.

“If shares are being sold to other state-run companies, the process of divestment may get further delayed by another six months at least, as it may need several clearances including those from the respective boards,” he said.

For the year 2021-22,

The government set a divestment target of Rs 1.75 lakh crore for 2021-22 – Rs 1 lakh crore from selling stakes in public sector banks and financial institutions and Rs 75,000 crore from divesting equity in public sector companies. The target is higher than the Rs 32,835 crore the government from divestment last year. Hence, the divestment of BPCL is considered to be a key in achieving the current year’s divestment target.

Industry experts also say COVID-19 may be another spoiler for the divestment process.

Parties interested in BPCL will soon be given access to a ‘clean data room’ of the company that may include commercially sensitive information too. Already, a virtual data room was opened in the month of April.

Three potential bidders, including Vedanta Group and two private equity funds -- Apollo Global and I Squared Capital --have expressed interest in BPCL. Based on the current market cap, Centre’s 52.98 per cent stake in BPCL is valued at around Rs 54,000 crore.