Saudi Aramco, Rosneft, Shell among global oil majors likely to bid for govt's stake in BPCL

The government's stake sale in Bharat Petroleum Corp Ltd (BPCL) is likely to see bids from international oil giants such as Saudi Aramco, Rosneft, Kuwait Petroleum, ExxonMobil, Shell, Total SA and Abu Dhabi National Oil Co. The government plans to offload 53.29% share stake in BPCL.

In the Union Budget, the government had pegged the disinvestment target of Rs 1.05 lakh crore for the financial year 2019-20. Stake sale in PSUs is top priority for the government in absence of which fiscal deficit is expected to widen in the next seven months. Lower-than-expected goods and services tax collections and a corporate tax cut that will cost the exchequer Rs 1.45 trillion are expected to add to fiscal deficit this fiscal.

Also read: BPCL stock falls for third straight day after Moody's, Centrum Broking turn cautious post privatisation announcement

The Department of Investment and Public Asset Management (DIPAM) is conducting the process of hiring investment bankers, legal advisor and asset valuer to execute the BPCL stake sale in the world's fastest-growing major oil market, according to a report in Livemint.

"DIPAM would appoint an adviser and a valuer in November. The valuation report is expected to be submitted in 50 days," the daily cited a person in knowledge of the matter as saying.

In response to the Mint report, a spokesperson for Shell India said it does "not comment on market speculation." A New Delhi-based spokesperson for ExxonMobil said, "We do not comment on market rumours or speculation about our business plans. ExxonMobil continuously evaluates its global portfolio of businesses and opportunities for growth, restructuring or divestment, depending upon fit with its overall strategic business objectives."

"We expect significant interest for the government's stake in BPCL. The company's downstream business is quite promising and is the most professionally run organisation among oil marketing companies. It is a good bet for any company that plans to have a foothold in the Indian market," the person cited above told Mint.

On September 30, a core group of secretaries on divestment approved the privatisation of BPCL.

The government is likely to open technical bids by potential advisors, legal advisors and valuers for the stake sale on November 4.  Financial bids of the shortlisted bidders will be opened shortly after that.  

"Rosneft, which bought Essar Oil, and BP Plc, which announced a 49% stake in oil marketing joint venture with RIL, is likely to bid. Kuwait Petroleum (bid for IBP, was shortlisted to bid for HPCL in 2003 and wants to acquire downstream assets in Asia), Total SA (to invest $800m in Indian gas sector), ExxonMobil, Shell (second highest bidder for IBP) and ADNOC may also bid for BPCL," Vidyadhar Ginde, an analyst at ICICI Securities, said in a 14 October report on BPCL's privatisation.

Also read: Govt stake in BPCL may cost Rs 60,000 crore for buyer

In January 1976, the Burmah Shell group of companies was taken over by the Government of India to form Bharat Refineries Limited, which was later renamed as Bharat Petroleum Corporation Limited.

This is the second time that a Bharatiya Janata Party-led government has considered the privatisation of BPCL.

In 2003, the Supreme Court rejected a similar move by the Atal Bihari Vajpayee government and said that privatisation required parliamentary approval. However, the Narendra Modi government which enjoys a majority in Lok Sabha, cleared the path for stake sale.

The total attributable refining capacity of BPCL is about 35 million tonnes (MT) annually. It operates 15,078 fuel stations, which accounts for a quarter of the retailing market share, and 6,004 LPG distributors. In the last financial year, the company posted a 13 per cent fall in consolidated profit to Rs 8,528 crore. Sales went up 22 per cent to Rs 3.4 lakh crore.

In January last year, the government sold its entire 51.11 per cent stake in HPCL to state-run Oil and Natural Gas Corp. Ltd for Rs 36,915 crore. The divestment price was at a roughly 18% premium to prevailing prices. Thereafter, HPCL became its subsidiary.

By Aseem Thapliyal