State-owned entities may be barred from bidding for the Centre’s stake in oil-refiner-marketer Bharat Petroleum Corporation (BPCL), which could fetch close to Rs. 70,000 crore or two-third of the disinvestment revenue target of Rs. 1.05 lakh crore for this fiscal, as it does not want to repeat PSU-to-PSU deals similar to ONGC-HPCL or PFC-REC.

A clause this effect might be incorporated in the expression of interest (EoI) and preliminary information memorandum (PIM) document for BPCL stake sale, sources told FE.

State-owned oil retailer Indian Oil Corporation (IOC) was evaluating the option of throwing its hat in the ring and taking over the entire 53.3% government stake in BPCL. According to an internal note circulated among IOC top brass which FE has accessed, its marketing division discussed “the issue of taking the government stake in BPCL or the ONGC stake in HPCL by IOC”, in the light of the risks to its business from a possible privatisation of BPCL, at a meeting on October 25.

The note also talks about the “enormous pricing flexibility” that BPCL might enjoy if its new owner turns out to be one with major crude oil assets and experience in oil retailing, a scenario which could be to the detriment of IOC’s financials in the short term.

The government’s stake in BPCL is worth about Rs. 60,000 crore at current market prices, but it could go up to Rs. 70,000 crore as the transaction is expected to happen at a premium over the current prices.

In FY18, the government had raised Rs. 36,915 crore by selling its 51% stake in HPCL to upstream major ONGC and in FY19, its REC stake was sold to PFC for Rs. 15,000 crore. Even though the Centre mobilised a record Rs. 1 lakh crore in FY18 and Rs. 85,000 crore in FY19 from disinvestment of its stake in various companies, some of its sheen was taken away by the fact that CPSE-CPSE deals played a major role in boosting the receipts.

Currently, IOC owns 43% fuel retail outlets in the country while BPCL’s share is 23%. HPCL owns 24% of the domestic fuel retail network. At FY19-end, IOC had reserves and surplus of Rs. 1.03 lakh crore and a debt to equity ratio of 0.7.

Saudi Aramco, the world’s largest integrated oil and gas company, might team up with an Indian company to bid for BPCL as it was looking at downstream investments in high growth economies, including India.