BPCL sale: Bidders worried as financial bids ‘delayed’

The bidders for state-run oil marketer-cum-retailer BPCL are understood to be anxious about what they perceive as a lack of definite timelines for the company’s privatisation process, as they think any delay could impair their ability to arrange funds. Seeking anonymity due to the discreet nature of the deliberations, a person familiar with the matter said that, “big-ticket investors are waiting for clarity on the timelines of the auction process before making their final investment commitments”.

Any delay in invitation of the financial bids could also derail the government’s disinvestment target for FY22, as such “large deals involving big investments can take 4-5 months for completion,” the source pointed out.

Even though officials were indicating earlier that financial bids for BPCL will be invited soon, the bidders fear the government has developed cold feet, especially after the successful privatisation of national carrier Air India.

Of the disinvestment target of Rs 1.75 lakh crore for FY22, a large part is expected to come from BPCL privatisation. In November 2020, multiple bidders including Vedanta, Apollo Global Management and Think Gas — showed interest in BPCL.

The market value of the Centre’s 52.98% stake in BPCL was worth a little over Rs 49,600 crore at the current market prices.

Queries sent to the Department of Investment and Public Asset Management (DIPAM) on Tuesday regarding the timing of BPCL financial bids were not responded to.

DIPAM secretary Tuhin Kanta Pandey recently told FE that plans are afoot to invite financial bids for BPCL by December. The bidders are in talks with multinational energy firms and other investment firms, but the closure of these deals depend on the announcement of concrete bid timelines.

Commenting on the current global investment scenario where funding in fossil fuels can potentially come under the scanner of climate watchdogs, one of the persons mentioned above stated that “the due diligence process assesses all pros and cons of any deal, and the current concerns related to climate change and investments in the petroleum sector are also part of the due diligence process.” However, the person stressed that “it (climate concern) is not a deal-breaker”.

Along with its 19,000 plus retail outlets, BPCL operates three refineries in India: Mumbai Refinery, Kochi Refinery and Bina Refinery. The government would likely want a premium over the current market valuation for its stake in BPCL. To pave the way for privatisation, BPCL has sold its entire 61.5% in Numaligarh Refinery to a consortium led by Oil India. It has also acquired 36.62% stake in Bharat Oman Refineries Ltd (BORL) — the unit that runs the 7.8 million tonne Bina refinery — from OQ SAOC (formerly known as Oman Oil Company), turning BORL into a wholly owned subsidiary of BPCL.

On October 8, the government announced that the Tata Group has won the rather sedate race for full ownership of Air India that has long guzzled taxpayers’ money by offering Rs 18,000 crore as enterprise value (EV) consideration. This was the first privatization after a gap of 17 years.