Bharat Petroleum Employee Trust Buys 2% Stake from Treasury

(Bloomberg) -- A newly formed employee trust of Bharat Petroleum Corp. spent about 15 billion rupees ($204 million) to purchase treasury stock of the state-run refiner in a block deal.

Bharat Petroleum sold 43.4 million treasury shares at Tuesday’s closing price of 343.35 rupees to the trust, N. Vijayagopal, director of finance, said in a phone interview Wednesday. The trust -- Employee Stock Purchase Scheme -- has been formed to provide stock at a discount to eligible employees.

Shares of Bharat Petroleum climbed 1.1% to 347.15 rupees as of 2:43 p.m. in Mumbai. They have declined 29% this year.

• The state-run refiner at its annual shareholder meeting held in September decided to allocate 2% of its paid up capital to employees at discounted rates. About 9.3% is held as treasury shares
• The trust, which has senior employees as its three trusties, has been given an interest-free loan by Bharat Petroleum of about 15 billion rupees to buy the treasury stock
• The trust will hold the shares for six months before transferring it to eligible employees. Once the employees buy these shares, the money will be used to repay the loan. Any discount will be absorbed by the state-run refiner, Vijayagopal said
  • Prime Minister Narendra Modi’s government is offering Bharat Petroleum employees shares at a discounted price as an incentive to allow the firm to be privatized
• The company is yet to decide on the remaining 7.33% of paid up capital that’s left as treasury stock. It plans to announce a decision before request for proposal for disinvestment is issued
• “If Nov. 16 is last day for expression of interest and there is no further extension, then by the end of December we will come to a final decision. We have three options -- we can either hold it, share it or cancel it,” Vijayagopal said, referring to the remaining treasury shares
• “Unless prices show a better movement, we will not be able to take decision on selling because prices have been hammered across the oil sector,” Vijayagopal said
• The company’s board has the permission of the government, its largest shareholder, for both options of either selling or canceling remaining treasury shares

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