BPCL divestment: Govt receives 'multiple' bids for the fuel retailer's stake

Recently, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), the key department responsible for the strategic sale, tweeted that the transaction advisors for the sale of government's 52.98 percent stake in Bharat Petroleum Corp Ltd (BPCL) have reported receiving "multiple expressions of interest".

"The transaction will move to the second stage after scrutiny by TA (transaction advisor)," Pandey said.

The sources further added that “the government is keen to divest BPCL stake now as the world is moving to renewable and given this shift, finance ministry feels it is the right time when government can get the right valuation for this asset.”

Though the government has clarified that it has got “multiple bids”, but a lot of fingers are pointed at the fact that since giants have not applied, a tepid response might derail the BPCL divestment process and government should rather wait to get the best valuation.

Reacting to such observations, government sources clarified that “this sector is a sunset sector and not a sunrise sector, thus a wait and watch situation would not necessarily yield higher valuations in the times to come. Thus, government sources say that they are hopeful of BPCL stake sale at right valuation in the current divestment spree.”

Finance Minister Nirmala Sitharaman also tweeted post closure of the EOI of BPCL, saying "Strategic disinvestment of BPCL progresses: Now moves to the second stage after multiple expressions of interest have been received”.

However, the government so far has not given the number of bids received or the names of the bidders.

It was understood that if Reliance Industries considered BPCL then it would have added 22 percent fuel market share to its fledgling retail business and made it the nation's number one oil refiner.

According to them, Finance ministry, along with the 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 two-three weeks, thereafter request for proposal (RFP) will be issued and financial bids sought.

BPCL will give the buyer ownership to 15.33 percent of India's oil refining capacity and 22 percent of the fuel marketing share.

Privatisation of BPCL is essential for meeting the record Rs 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 percent of India's total refining capacity of 249.8 million tonne.

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 tonne of refining capacity - 12 million tonne Mumbai unit, 15.5 million tonne Kochi refinery and 7.8 million tonne Bina unit.

BPCL 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 percent during FY20. It is India's 6th 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 9 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).

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