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The government proposed raising  ₹1.05 lakh crore from disinvestment in the current financial year. (Bloomberg)
The government proposed raising 1.05 lakh crore from disinvestment in the current financial year. (Bloomberg)

Govt decision to privatise BPCL 'a credit negative', says Moody’s

  • The Centre holds 53.29% stake in BPCL, 54.8% in Concor and 63.75% in SCI
  • The government proposed raising 1.05 lakh crore from disinvestment in the current financial year

The government has announced mega divestment plans for four blue-chip public-sector companies, but Moody’s Investor Service sees it as a setback. Calling the decision to privatise Bharat Petroleum Corporation Ltd (BPCL) “a credit negative", Moody’s said it may not bode well for BPCL’s ratings.

“Stake sale could remove BPCL’s links to the government and prompt bond redemption," Moody’ said.

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A group of secretaries on Monday cleared strategic sale of government’s entire shareholding in BPCL, Shipping Corporation of India, THDC India and North Eastern Electric Power Corporation Ltd (NEEPCO). It also cleared a sale of 30% equity in Container Corp of India (Concor) from the government holding.

This would be the biggest privatisation of state-owned companies proposed to be undertaken by an Indian government since the Atal Bihari Vajpayee dispensation in early 2000. For the sale of BPCL, the government will have to seek the approval of the two Houses for its sale since the company was formed under an act of Parliament.

The Centre holds 53.29% stake in BPCL, 54.8% in Concor and 63.75% in SCI. THDC is a 75:25 joint venture between the Centre and the Uttar Pradesh government. The government owns entire equity of NEEPCO.

Shares of BPCL have been on the rise, with the stock ending 7.5% higher at 530.95 rupees on Thursday. However, investors will watch out for ratings by Moody’s, as the agency said it would downgrade BPCL following its privatisation.

The government proposed raising 1.05 lakh crore from disinvestment in the current financial year. It had surpassed its asset-sale targets of 1 lakh crore in 2017-18 and 80,000 crore in 2018-19.

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