Anil Agarwal-led Vedanta Ltd plans to set up a specific fund with a strategic investor to finance the likely acquisition of state-run Bharat Petroleum Corporation Ltd (BPCL), in case the transaction culminates.
The company said in a statement on February 8 that it will finance the potential acquisition through the fund so that it does not have to leverage its own balance sheet. The Indian government has put BPCL on the block for divestment of its 53 percent stake in the oil marketing company worth over $6 billion.
“The bid for BPCL is at expression of interest (EoI) stage. In case the transaction culminates, Company may undertake management of the acquired business, through appropriate profit-sharing arrangement or on management fee model. A specific fund, with a strategic investor will be set up to fund the potential investment, without leveraging Vedanta Limited’s Balance Sheet,” Vedanta said.
On February 8, Vedanta informed the bourses that the mining major has dismissed the plans to rejig its corporate structure, after completing its reorganisation review. The company has arrived at the conclusion that its current structure is optimal and is commensurate with the present scale and its diversified lines of business.
“We will continue to focus on operational performance to enhance profitability and free cash flows. We are committed to right levels of leverage and strong balance sheet to maximize shareholders value,” Agarwal, the chairman of Vedanta Group, said.
Vedanta said the group’s capital allocation policy will be the primary guiding factor and it aims to focus on organic growth. It will selectively participate in mergers and acquisitions which fall within the overall capital allocation framework, if the acquisition is accretive to existing businesses or has synergies with its core businesses.
“Vedanta has proven expertise and successful track record of turning around acquired businesses. Company will participate in divestment program which has strategic fit with the portfolio,” the statement said.
In an interview with Reuters on January 20, Agarwal had said that the group is in the process of creating a fund of $10 billion, which not only consider the acquisition of BPCL but also explore the potential of other acquisitions of companies being privatised by the government.
Vedanta, the Indian-listed subsidiary of the London-headquartered Vedanta Resources, was among the entities that submitted the preliminary expression of interest in acquiring the government’s stake in BPCL in November 2020. The company’s divestment process has been delayed and the government is now hoping to close it in fiscal year 2022-23.
Shares of Vedanta closed at Rs 369.60 on the BSE, up 1.2 percent from the previous close. BPCL shares closed up 1.4 percent at Rs 377.50.
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