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Network 18 Exclusive: Funding for BPCL deal will never happen from Vedanta, says Anil Agarwal

On Hindustan Zinc, Vedanta founder and chairman Anil Agarwal said the company can acquire up to 5 percent stake if the government plans to sell it.

February 09, 2022 / 06:35 PM IST
File image of Vedanta's Anil Agarwal (Image: PTI)

File image of Vedanta's Anil Agarwal (Image: PTI)

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Funding for Bharat Petroleum Corporation Ltd (BPCL) will never come from Vedanta if the deal happens, founder and chairman Anil Agarwal told CNBC-TV18 on February 9.

The government had in November 2019 cleared the sale of its 52.98 percent stake in the state-owned oil marketing company.

“On BPCL, I have always said Vedanta won’t fund the deal if it happens. Vedanta follows a disciplined capital allocation policy,” Agarwal said.

The company does not feel it necessary to demerge as “we can have one strong company”. He affirmed that there is no plan to delist Vedanta. “We are comfortable with $12.5-billion debt, which is 1.2-1.3x debt-equity ratio.”

Agarwal said that there are no plans to fund its subsidiary Vedanta Ltd via parent company Vedanta Resources’ balance sheet. “There will be no move to merge the parent company with Vedanta,” he said.

On Vedanta arm Hindustan Zinc, Agarwal said the company can acquire an additional stake of up to 5 percent if the government plans to sell it, adding that his company would look to pick up more if the government allows.

“There will be enough demand in the market for rest of the stake in Hindustan Zinc. The option of buying full residual stake in Hindustan Zinc will be dependent on valuations and regulatory nod,” he said.

Agarwal told the channel that he has no plans to increase his stake in Vedanta from the current promoter holding level.

What’s happening with BPCL?

On February 8, Vedanta in a statement said it plans to set up a specific fund with a strategic investor to finance the likely acquisition of state-run BPCL, in case the transaction goes through.

“The bid for BPCL is at the EoI (expression of interest) 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’s balance sheet,” it said in a statement.

The company on February 8 also informed regulators that it 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 has proven expertise and a successful track record of turning around acquired businesses. The company will participate in the divestment program which has strategic fit with the portfolio,” the statement said. The government has put BPCL on the block for divestment of its stake worth over $6 billion.

Will BPCL divestment happen?

On February 9, sources also told CNBC-TV18 that the finance ministry is on “wait-and-watch mode” regarding the BPCL privatisation, after the consortia that submitted EoI expressed reservations.

The reasons for developing cold feet could be manifold, including changing dynamics of the fossil fuel market, the deep pockets needed to buy a blue chip like BPCL and changes in the composition of various consortia that had initially shown interest, according to officials.

Five of the six EoIs that were received have been withdrawn and only one from Vedanta remains, the sources added. However, the government at this stage is not convinced about reconsidering BPCL’s privatisation and has not called for fresh EoIs, even though the option exists, the officials noted.

“The government is holding on to the current process and the transaction advisor will attempt to persuade potential buyers to return to the table,” an official said.

Till the matter is settled, BPCL’s privatisation will be at the due diligence stage with potential buyers yet to undertake physical visits and access the virtual data room, it said.

Moneycontrol News
first published: Feb 9, 2022 02:54 pm