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Privatization of BPCL may be pushed to next fiscal year

So far, billionaire Anil Agarwal’s Vedanta group, private equity firm Apollo Global and I Squared Capital’s Think Gas arm have expressed interest in buying the government’s 52.98 % stake  (Photo: Mint)Premium
So far, billionaire Anil Agarwal’s Vedanta group, private equity firm Apollo Global and I Squared Capital’s Think Gas arm have expressed interest in buying the government’s 52.98 % stake  (Photo: Mint)

The financial bids have not yet been called, and we have just three months left. Given BPCL’s borrowings, it will need approval from lenders (long-term agreements have a clause that requires lenders’ approval for promoter changes), which would take a few months, said an officials, who is tracking the sale

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MUMBAI : The privatization of state-run Bharat Petroleum Corp. Ltd (BPCL) may be pushed to the next fiscal as the sale process has not progressed at the desired pace, two officials aware of the development said.

“The financial bids have not yet been called, and we have just three months left. Given BPCL’s borrowings, it will need approval from lenders (long-term agreements have a clause that requires lenders’ approval for promoter changes), which would take a few months," said one of the two officials, who is tracking the sale. Both the officials declined to be named.

The government’s plan to raise a record 1.75 trillion from disinvestment proceeds this year now entirely hinges on the success of the initial public offering of India’s largest insurer, Life Insurance Corp. of India. Still, the target is likely to be elusive as the Centre planned to raise 60,000 crore, or more than a third of its overall disinvestment target, from the BPCL privatization alone.

The government gave bidders access to BPCL’s data on 10 April last year.

So far, billionaire Anil Agarwal’s Vedanta group, private equity firm Apollo Global and I Squared Capital’s Think Gas arm have expressed interest in buying the government’s 52.98 % stake.

The government initially targeted to call financial bids by August 2021 and get the sale and purchase agreement signed by September to complete the deal by March 2022. But the covid-19 pandemic altered the investment climate for energy companies, which were already facing challenges such as high write-offs due to volatile energy prices, reduced production, and capital expenditure.

As a result, the government was forced to extend the deadline for preliminary expressions of interest for BPCL as many as four times.

“Bidders need the financial muscle to bid for BPCL. Some bidders are looking for financial partners to form a consortium to finance the deal. Till a year ago, global energy majors were holding discussions for the BPCL stake sale, but covid-19 has put a spanner in the works," said a banker who works on energy deals, seeking anonymity.

BPCL’s winning bidder will get access to a 25.77% market share in India’s fuel retailing segment, along with 15.3% of India’s refining capacity. BPCL operates four refineries in Mumbai, Kochi, Bina and Numaligarh, with a combined capacity of 38.3 million tonnes per annum.

As part of the privatization, BPCL sold its 61.65% stake in Assam-based Numaligarh Refinery Ltd for 9,875 crore to a consortium of Oil India Ltd and Engineers India Ltd (49%) and the remaining 13.65% to the Assam government in March.

The company also acquired a 36.6% stake from its partner OQ, the national oil company of Oman, in Bharat Oman Refinery Ltd for 2,400 crore in March. BPCL, however, said it has no plan to sell its stakes in Indraprastha Gas Ltd and Petronet LNG Ltd.

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