NEW DELHI: Initial bids for privatisation of Bharat Petroleum Corp Ltd (BPCL) will close on Monday amid indications of supermajors UK’s BP Plc, Total of France and Saudi Aramco unlikely to bid.
The government, which is selling its entire 52.98 per cent stake in India’s second largest oil refining and marketing company, had on four occasions extended the date of putting in the preliminary expression of interest (EoI). The current deadline is November 16.
Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had last month told PTI that there would be no further extension.
Industry sources said BP as well as Total are unlikely to bid for the stake and there are reports of even Russian energy giant Rosneft or its affiliates and Saudi Arabian Oil Company (Saudi Aramco) not very keen on bidding given the asking price of close to USD 10 billion required to buy the firm at a time when the world is moving away from conventional fuel.
Also, the pandemic has led to demand destruction of conventional fuels and may hasten transition towards cleaner fuels such as hydrogen and battery-operated EVs.
Given the uncertain demand scenario, the investors are weighing if BPCL acquisition makes sense, they said.
At Friday’s closing price of Rs 412.70 on the BSE, the government’s 52.98 per cent stake in BPCL is worth Rs 47,430 crore. Also, the acquirer would have to make an open offer for buying another 26 per cent stake from the public, which would cost Rs 23,276 crore.
Sources said BPCL annually makes a profit of about Rs 8,000 crore and at this pace it would take 8-9 years for the investor to recover the bid amount of over Rs 70,000 crore.
The acquisition makes sense for companies which can double the profit by growing the business as well as through operational efficiencies and synergies with existing business in half that timeframe.
Billionaire Mukesh Ambani-led Reliance Industries Ltd, which operates the world’s largest single location oil refining complex at Jamnagar in Gujarat and has fledgling ambitions to retail fuel, can be one such company.
Reliance has so far remained tight-lipped about its intentions for BPCL.
Reliance, which had recently hired former BPCL chairman Sarthak Behuria, a few weeks back got former Indian Oil Corp (IOC) chairman Sanjiv Singh. The two hires could be linked to its desire to bid for BPCL, sources said.
Sources said it makes business sense for Reliance to combine its Jamnagar refineries with BPCL’s Mumbai, Kochi and Bina units as well as merge its 1,406-plus fuel stations with 17,138 petrol pumps of BPCL.
The same logic also applies for Rosneft-led Nayara Energy, which operates a 20 million tonnes oil refinery at Vadinar in Gujarat and also has 5,822 petrol pumps. But reports indicated Rosneft no longer keen on bidding for BPCL.
Rosneft CEO Igor Sechin had in February this year had indicated the Russian giant’s interest in BPCL but it is now keen only on the marketing infrastructure of the company and not its refineries.
Source: Press Trust of India
