The Cabinet, on Friday, allowed Bharat Petroleum Corp Ltd (BPCL) to sell its 49% stake in a joint venture lubricant marketing firm Bharat Shell Ltd (BSL), to partner Royal Dutch Shell for Rs 152.40 crore ($38.4 million) in cash.
BPCL is exiting BSL, which was floated in 1993 to market Shell branded lubricants in India, after it developed a competing product.
“The Cabinet, at its meeting on November 29, gave its approval for the sale of a 49% equity stake of BPCL in BSL to Shell or its affiliates, for a consideration of Rs 152.40 crore in cash,” Information and broadcasting minister PR Dasmunsi told newspersons. Dasmunsi said the sale would allow BPCL to exit BSL, which has a competing business interest with BPCL. Both firms produce and sell branded lubricants in India. Shell currently holds a 51% stake in BSL and has operational control. After the acquisition, Shell would remove the ‘Bharat’ name in BSL. “This would enable BPCL to concentrate on the building and promotion of its own brand of lubricants, resulting in improved brand image, higher growth, efficiency, and profits,” he said.
BSL incurred losses till financial year 2001-02, but after hiving off its loss-making LPG business, the company showed signs of a turnaround, and posted a net profit of Rs 12.12 crore in 2006-07.
Besides paying BPCL cash, Shell will also take over the state-run firm?s 49% of BSL?s debt, which amounts to Rs 31.2 crore as on March 31, 2006.
Official sources said BSL was formed to strengthen BPCL’s position in the lubricant market, by availing the opportunity for blending and marketing high performance speciality lubricants. BPCL did not have its own production of base oil at that time.
Both, BPCL and Shell recognised the need for building their own brands independently in India and the state-run firm decided to exit BSL.
The board of Shell had, on May 10, approved the share purchase agreement with BPCL to acquire its 49% stake in BSL at a price not exceeding Rs 177 crore.