Govt receives multiple bids for BPCL; Reliance not in race

The government on Monday received multiple bids for buying out its stake in India’s second-biggest fuel retailer BPCL but billionaire Mukesh Ambani’s Reliance Industries as well as supermajors Saudi Aramco, BP and Total did not make a bid. 

Tuhin Kanta Pandey, secretary, department of investment and public asset management (DIPAM), which is handling the strategic sale, tweeted that the transaction advisors for the sale of the government’s 52.98 per cent stake in Bharat Petroleum Corp Ltd (BPCL) have reported receiving “multiple expressions of interest.” 

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“The transaction will move to the second stage after scrutiny by TA,” he said. TA stands for transaction advisor. “Strategic disinvestment of BPCL progresses: Now moves to the second stage after multiple expressions of interest have been received,” Finance Minister Nirmala Sitharaman also tweeted. 

Neither of them, however, gave the number of bids received or the names of the bidders. Separately, four industry officials said 3-4 bids have been put in. Reliance Industries, which was considered a potential bidder as BPCL would have added 22 per cent fuel market share to its fledgling retail business and made it the nation’s number one oil refiner, did not put in an expression of interest (EoI) at the close of the deadline on Monday. Saudi Arabian Oil Company (Saudi Aramco), which had been keen to enter the world’s fastest-growing fuel market, too, did not put in an EoI. UKs BP plc and Total of France, who have plans to foray into the Indian fuel market, had previously ruled themselves out of the BPCL race as they did not want to add oil refining assets when the world was moving away from liquid fuels. 

A clutch of private equity funds and/or pension funds are said to have put in an EoI. Russian energy giant Rosneft-led Nayara Energy, which operates a 20 million tonnes oil refinery at Vadinar in Gujarat and also has 5,822 petrol pumps, was considered a potential bidder for BPCL but reports last month indicated it was no longer keen. Abu Dhabi National Oil Co (ADNOC), which has ambitions for the Indian market, too was considered a potential bidder but it wasn’t immediately known if it had put in an EoI. 

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Mining billionaire Anil Agarwal is considered another potential bidder given his interest in the oil and gas business with the $8.67 billion acquisition of Cairn India. 

Sources said transaction advisors will now evaluate the bidders to ascertain if they indeed meet the qualifying criteria and would have the financial muscle to do the acquisition. This process may take 2-3 weeks, thereafter the request for proposal (RFP) will be issued and financial bids sought. 

At Friday’s closing price of ₹412.70 on BSE, the government’s 52.98 per cent stake in BPCL is worth ₹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 ₹23,276 crore. BPCL will give the buyer ownership to 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share. Privatisation of BPCL is essential for meeting the record ₹2.1 lakh crore target the finance minister has set from disinvestment proceeds in the budget for 2020-21. 

BPCL operates four refineries in Mumbai (Maharashtra), Kochi (Kerala), Bina (Madhya Pradesh), and Numaligarh (Assam) with a combined capacity of 38.3 million tonne per annum, which is 15.3 per cent of India’s total refining capacity of 249.8 million tonnes. 

While the Numaligarh refinery will be carved out of BPCL and sold to a PSU, the new buyer of the company will get 35.3 million tonnes of refining capacity — the 12 million tonnes Mumbai unit, the 15.5 million tonnes Kochi refinery and the 7.8 million tonnes Bina unit. It also owns 17,138 petrol pumps, 6,151 LPG distributor agencies and 61 out of 256 aviation fuel stations in the country. 

BPCL is India’s second-largest oil marketing company with a standalone domestic sales volume of over 43.10 million tonnes and a market share of 22 per cent in FY20. It is India’s sixth largest company by turnover. Its petrol pumps sell more fuel than the industry average — BPCL pumps sell 124 kilolitres per month as compared to the industry average of 116, according to the company website. The firm also has upstream presence with 26 assets in nine countries such as Russia, Brazil, Mozambique, the UAE, Indonesia, Australia, East Timor, Israel and India. It is also making a foray into city gas distribution and has licences for 37 geographical areas (GAs).