BPCL bid evaluation meet on Tuesday; Vedanta, Apollo Global, I Squared Capital arm in race

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December 14, 2020 6:53 PM

On Tuesday, the panel will see transaction advisor Deloitte's report on the scrutiny of the three bids that were received at the close of bidding last month, sources in know of the development said.

A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources submitted an expression of interest (EoI) before the close of deadline on November 16.A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources submitted an expression of interest (EoI) before the close of deadline on November 16.

A high-powered committee will on Tuesday evaluate preliminary bids received from mining-to-oil conglomerate Vedanta and private equity firms Apollo Global and I Squared Capital’s arm Think Gas for buying the government’s 52.98 per cent stake in BPCL, sources said.

Last week, an inter-ministerial meet was held to discuss the BPCL valuation process and setting of the reserve price.
On Tuesday, the panel will see transaction advisor Deloitte’s report on the scrutiny of the three bids that were received at the close of bidding last month, sources in know of the development said.

The Ministry of Petroleum and Natural Gas, the parent ministry of Bharat Petroleum Corporation Limited (BPCL), has been asked to give its views on the response and the process so far.

A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources submitted an expression of interest (EoI) before the close of deadline on November 16.

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.

The government is selling its entire 52.98 per cent stake in India’s second largest fuel retailer as part of plans to raise a record Rs 2.1 lakh crore from disinvestment proceeds in 2020-21 (April 2020 to March 2021).

But share price of BPCL has plunged by nearly a fifth since the time the strategic sale was approved in November last year.

At Monday’s closing price of Rs 405.75 on BSE, the government’s 52.98 per cent stake in BPCL is worth just over Rs 46,600 crore. Also, the acquirer would have to make an open offer for buying another 26 per cent stake from the public, which would cost about Rs 22,800 crore.

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 are used in refineries such as those operated by BPCL to turn them into petrol, diesel and other fuels.

The government had at the close of bidding stated that “multiple” EoIs had been received. It, however, did not reveal the identity of the bidders.

Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), which is handling the strategic sale, had tweeted on November 16 that the transaction advisors for the sale of government’s 52.98 per cent stake in BPCL have reported receiving “multiple expressions of interest.”

“The transaction will move to the second stage after scrutiny by TA,” he had 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 had also tweeted on the same day.

Sources said the transaction advisor’s job was to evaluate the bidders to ascertain if they meet the qualifying criteria and have the financial muscle to do the acquisition. BPCL will give the buyer ownership of around 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share.

BPCL operates four refineries in Mumbai (Maharashtra), Kochi (Kerala), Bina (Madhya Pradesh), and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes 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 — 12 million tonne Mumbai unit, 15.5 million tonne Kochi refinery and 7.8 million tonne Bina unit.

It also owns 17,355 petrol pumps, 6,159 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 during 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)

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