In Centre’s strategy to get best price for BPCL, a plan to trifurcate assets

india

Updated: Nov 20, 2019 21:45 IST

The National Democratic Alliance (NDA) government plans to trifurcate the assets of Bharat Petroleum Corporation Ltd (BPCL) before divesting its stake in the state-run refiner and oil retailer in a complex transaction designed to derive maximum value from the sale, two officials with direct knowledge of the development said on condition of anonymity.

Under the plan, one part of BPCL will be a wholly owned entity of the company, one will become part of a joint venture and its Numaligarh Refinery Ltd (NRL) in Assam will become a separate asset that will eventually be sold to another public sector oil company, the two officials said.

“The proposed plan is expected to be discussed in the Cabinet today [Wednesday], which is expected to take a final call on this issue late in the evening,” the first official said.

In order to derive maximum value from the eventual disinvestment, the government may also explore bifurcating the company’s interests in oil refining and fuel retail. There are investors who are interested in picking up controlling stakes in either its refining business or petrol pumps, the sec

The National Democratic Alliance (NDA) government plans to trifurcate the assets of Bharat Petroleum Corporation Ltd (BPCL) before divesting its stake in the state-run refiner and oil retailer in a complex transaction designed to derive maximum value from the sale, two officials with direct knowledge of the development said on condition of anonymity.

Under the plan, one part of BPCL will comprise of wholly owned entities of the company, the other will comprise of its joint ventures and the third will be the Assam refinery owned by its Numaligarh Refinery Ltd (NRL) that will eventually be sold to another public sector oil company, the two officials said.

“The proposed plan is expected to be discussed in the Cabinet today [Wednesday], which is likely to take a final call on this issue late in the evening,” the first official said.

In order to derive maximum value from the eventual disinvestment, the government may also explore bifurcating the company’s interests in oil refining and fuel retail. There are investors who are interested in picking up controlling stakes in either its refining business or petrol pumps, the second official said.

The company, which has four refineries, has a total refining capacity of about 38 million tonnes per annum (MMTPA). It has about 15,000 retail outlets across the county, an executive in the company, said requesting anonymity.

BPCL’s refineries are located in Mumbai , Kochi in Kerala, Bina in Madhya Pradesh, under an equal joint venture with Oman Oil Company, and Numaligarh where Assam government has a minor stake, the executive said.

Some domestic refiners are keenly interested in the fuel retail business of BPCL because the company has fuel stations in lucrative locations across the county, but they may not like to buy BPCL’s refineries as they already have sufficient refining capacity, the second person said. In that case, BPCL’s refining business could be sold separately to other entities.

BPCL’s partners in joint ventures would get the first right of refusal to buying out the public sector oil company from the respective businesses, the official added.

The government has proposed divesting BPCL’s stake in Numaligarh Refinery to a public sector company because of its strategic positioning in the northeastern region. It is proposed that the company would be hived off and sold to another public sector undertaking (PSU) with interests in the northeast, the official said.

Numaligarh Refinery was incorporated with an authorised share capital of Rs 1,000 crore in 1993. The company operates a refinery with an annual capacity of 3 million tonnes in Numaligarh. NRL also has an LPG (liquified petroleum gas) bottling plant in Numaligarh.

According to the officials cited above, the cabinet, at a meeting chaired by Prime Minister Narendra Modi, is expected to consider these proposals for BPCL disinvestment along with three or four other state-run enterprises and a final decision, with amendments if any, could be announced Wednesday night.

According to the company’s annual report for 2018-19, the BPCL group consists of five Indian subsidiaries and six overseas subsidiaries. The company also has 22 joint venture and associate companies.

BPCL earned revenue of Rs 3.37 lakh crore in 2018-19 and posted a net profit of Rs 7,132.02 crore.

The company’s shares closed at Rs 544.65 on the BSE on Wednesday, a gain of 4.87% from the previous trading day. The Sensex gained 0.45% to 40,651.64 points.