New Delhi: Talks between private equity companies and one of India’s leading petroleum products retailers, Hindustan Petroleum Corporation Ltd (HPCL) over an equity stake in Prize Petroleum Company Ltd have ended without any deal.
HPCL had set up Prize as a joint-venture company, in partnership with ICICI and HDFC, to spearhead its hydrocarbon exploration and production efforts. The idea stemmed from a desire to be involved in the entire supply chain and also have an assured fuel supply.
“The talks did not work out as the interested companies did not agree to all our conditions,” said M.B. Lal, HPCL’s chairman and managing director, adding that the company will now look for other partners.
While HPCL holds a 50% stake in Prize, the balance is held by the two financial institutions.
Prize still plans to float an initial public offering later this year though it had hoped to find equity partners ahead of the IPO. Prize has a paid-up capital of Rs20 crore and plans to raise around $50 million (Rs220 crore).
Prize, which had appointed Grant Thornton as an adviser, had received expressions of interest from 20 companies and shortlisted four for talks.
Analysts feel Prize is unlikely to get high offers as it is a contract services company with limited oil and gas assets.
“As Prize plans to get into bigger projects, the right approach is to wait and allow the valuations to go up,” said one industry analyst who did not wish to be quoted.
Prize plans to use funds from the IPO to acquire hydrocarbon assets overseas and is aggressively scouting for opportunities. It is planning to invest up to $1 billion to acquire assets in the next three to five years.
Prize recently got one on-shore block along with Jaiprakash Associates under the government’s New Exploration Licensing Policy (NELP-VI.) It is also the operator for the block. Apart from this, Prize has one block in Gujarat and is also the service contractor for three Oil and Natural Gas Corporation fields there. Those contracts, however, are much more favourable to ONGC, the analyst added.
Industry observers also pointed out that HPCL will need capital of around Rs 80,000 crore for ongoing and proposed projects over the next six to seven years. “The company will either have to divest its stake in the likes of Prize or bring in new partners,” the analyst said.