BPCL to put 'suitors' in clean data room. So, what do they get there?

Bidders vying to buy the government’s stake in Bharat Petroleum Corporation Ltd (BPCL) will be given access to a ‘clean data room’ containing commercially sensitive information on the refiner, subject to their signing an additional confidentiality agreement, sources said.

A virtual data room, mostly containing financial information on BPCL, was opened in the second week of April and qualified bidders signing confidentiality undertaking (CU) documents have been given access, three sources with direct knowledge of the matter said.

What is a clean data room?

While a data room is a platform that consolidates data for due diligence, a ‘clean data room’ is used to offer any information that may be required for the interested party regarding post-deal activities such as integration and synergies. [Large companies store critical business data in clean data rooms. These places have strict privacy controls and others will not be able to pull out customer-level information].

It allows secure data transfer between the company and its various stakeholders, as well as with regulatory bodies. Here, potential suitors can expect to garner completed, accurate information in a secure environment.

In BPCL’s case, bidders — which include mining-to-oil conglomerate Vedanta and private equity firms Apollo Global and I Squared Capitals arm Think Gas — will also be allowed physical inspection of assets such as refineries and depots in the coming weeks as part of the due diligence process.

The government will seek financial bids once bidders complete due diligence and terms and conditions of the share purchase agreement (SPA) are negotiated.

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Sources said certain data which are commercially sensitive will be uploaded in the clean data room and access shall be extended only to the designated team of lawyers of the qualified bidders in the interest of confidentiality and prevention of misuse of data.

Separate confidentiality agreement

A separate agreement restricting use of the data and maintaining confidentiality will have to be signed by the bidders for accessing the clean data room, they said. The data room access for due diligence is likely to be available for around eight weeks.

As part of the due diligence process, the bidders may want to undertake a physical visit to some of the major sites like refineries and depots/plants. While BPCL will facilitate such visits, approval from the Ministry of External Affairs (MEA) is required in case any foreign passport holder wants to visit sensitive locations like refineries, sources said.

Also, representatives of the bidders will be allowed to hold virtual meetings with the  BPCL management once the silence period ahead of the announcement of annual financial results of the company for 2020-21 is announced.

All queries raised by the bidders during the due diligence are being collated by the transaction advisor Deloitte, and they will be answered by the company management or the concerned government department depending on the nature of the issue, sources said.

The government’s 52.98% stake in BPCL is valued at about ₹53,000 crore based on Friday’s closing price of the stock.

The stake sale in India’s second-largest fuel retailer is crucial to plans to raise a record ₹1.75 lakh crore from disinvestment proceeds in fiscal 2021-22 (April 2021 to March 2022). Sources said the recent COVID-19 outbreak could still slow down the sale process as physical visits may be hindered.

Global suitors

A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources Plc submitted an expression of interest (EoI) for buying the government stake in BPCL before the close of the deadline on November 16, 2020.

While I Squared Capital is a private equity firm focusing on global infrastructure investments, New York-based Apollo Global Management, Inc is a global alternative investment manager firm.

I Squared Capital invests in energy, utilities, transport and telecom projects in North America, Europe and select high growth economies such as India and China.

Vedanta’s interest in BPCL stems from its USD 8.67 billion acquisition of oil producer Cairn India nearly a decade back. The company produces oil from oilfields in Rajasthan, which is used in refineries such as those operated by BPCL to turn them into petrol, diesel and other fuels.

What’s on offer

BPCL will give the buyer ownership of around 15.33% of India’s oil refining capacity and 22% of the fuel marketing share.

The buyer of the company will get 35.3 million tonnes of refining capacity — 12 million tonne Mumbai unit, 15.5 million tonne Kochi refinery and 7.8 million tonne Bina unit.

BPCL also owns 18,639 petrol pumps, 6,166 LPG distributor agencies and 61 out of 260 aviation fuel stations in the country.

The firm also has an 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).