A top source said the privatization of BPCL, which was termed as India’s biggest ever, is stalled with just one bidder after two others ran into issues like lack of clarity in fuel pricing.
The government had planned to sell its entire 52.98% stake in Bharat Petroleum Corporation Limited (BPCL) and had invited expressions of interest from bidders in March 2020. There were at least three bids as of November 2020, but now only one remains after the others were withdrawn. Caste.
“We are in the position of a single bidder and it does not mean that one bidder decides the story,” the source said on condition of anonymity. So the disinvestment process is on hold for the time being.
The privatization of India’s second largest state oil refining and fuel marketing company did not attract much interest, first due to the volatile global oil price scenario and later due to lack of clarity in domestic fuel pricing.
Public sector fuel retailers, which control 90% of the petrol and diesel market, sell the fuel at below-cost prices. This has forced private sector retailers Reliance-BP, Rosneft-backed Naira and Shell into a situation where they either sell fuel at a loss or lose market share if they raise prices to accommodate costs. .
Mining mogul Anil Agarwal’s Vedanta Group and US venture funds Apollo Global Management Inc and I Squared Capital Advisors had expressed interest in buying the government’s stake in BPCL.
But both funds were withdrawn after failing to engage global investors amid declining interest in fossil fuels.
The source said the government had not invited financial bids.
Once the bidders completed due diligence and finalized the terms and conditions of the share purchase agreement, the Center was to seek financial bids.
There is talk that the government now wants to take a fresh look at the privatization of BPCL, including revising the terms of the sale.
Another source said that keeping in view the geopolitical situation and energy transition, the government may offer 26% stake with management control.
This would limit the amount the bidder would have to pay to buy the company.
At the current trading price of BPCL in the stock market, the government’s 53% stake is worth over Rs 38,000 crore. On top of this, the bidder will have to pay another ₹18,700 crore for an open offer to minority shareholders.
If the government sells 26% stake, the total financial expenditure of the bidder will not exceed ₹37,000 crore.
The government has not made any formal statement on the withdrawal of BPCL’s stake sale.
Vedanta Chairman Anil Agarwal told PTI last week that the government has withdrawn its offer to sell its stake in BPCL and will come up with a new strategy.
BPCL is India’s second largest oil marketing company after IndianOil, and with refineries in Mumbai, Kochi and Madhya Pradesh, it has the third largest refining capacity after Reliance and IndianOil.
Industry sources said while petrol prices were regulated in 2010 and diesel prices in 2014, the government continued its role in pricing both the fuels.
For the record, the oil ministry maintains that oil companies have the freedom to decide on pricing, but that prices are withheld every time an election is held in the country.
Indian Oil, BPCL and Hindustan Petroleum Corporation Ltd (HPCL) held prices for a record 137 days between November 2021 and March 2022 during assembly elections in five electoral states, despite a rise in international crude oil prices.