BPCL Paid Up For Defaulting Partner Videocon To Defend Brazilian JV, Says Chairman
Divestment-bound Bharat Petroleum Corporation Ltd. on Monday defended it paying $54 million on behalf of its bankrupt partner Videocon group in its Brazilian joint venture, saying it was to defend the asset and to follow the law of the land and that the move has increased its stake in the JV to over 54.5% now.
The company also said it will continue to protect the Brazilian asset meaning it will continue to make more payments on behalf of the Videocon group which has gone bankrupt and is in NCLT since 2018.
State-owned oil refiner in September 2008 roped in Videocon Industries into a 50:50 joint venture to acquire a Brazilian oil exploration firm for $283 million. IBV Brasil Petroleo holds interest in five blocks in three concessions in Brazil.
The two firms had formed incorporated joint venture IBV Brasil Petroleo, which according to the company acting chairman and managing director K Padmakar is required under the Brazilian law, to acquire Encana Brasil Petroleo from Canadian gas producer EnCana.
An incorporated joint venture is separate and we made the payment of $53.98 million on behalf of Videocon's share of cost to protect our interests and the assets which are very valuable and also not to make the JV a defaulter under Brazilian law.
The payment was also to protect the interest of lenders. "With this investment our stake in the JV has gone up to 54.5% and that we will continue to increase our stake in the joint venture as we move forward," Padmakar said at a post-AGM presser.
The payment was done during the course of the past fiscal. BPCL holds 12 overseas blocks through its subsidiary Bharat PetroResources. Five of these blocks are in Brazil, two in the UAE and one each in Mozambique, Indonesia, Australia, Israel and Timor Leste. Padmakar said during the first quarter, BPCL spent over Rs 2,100 crore in capex.
The company had earlier said it was scaling down FY2021 capex to Rs 8,000 crore from Rs 12,500 crore due to the pandemic. On the demand side, he said petrol demand is at pre-lockdown level but diesel is down 8-9% and going forward it may improve a bit but will remain in the red.
But there is hardly any demand from public transport so diesel demand will continue to languish still this changes and gasoline will continue to grow given the rising demand for personal mobility, he said, adding however LPG demand is up 8-9% over the pre-pandemic days.
On the ongoing VRS ahead of the divestment, for which Sept. 30 is the last day to submit expression of interest, he said as many as 1,100 have opted for retirement, bringing down the overall staff strength to 10,000 now.
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He refused to answer queries on divestment saying it is the government selling its stake in the company and not the company selling its stake. The company had debt of Rs 41,800 crore as of March 2020 which had come down to Rs 31,000 crore as of June and is further down to Rs 28,000 crore now.
On the nearly 8% treasury shares held through the employees trusts, he said it will not be part of the divestment and also can't be offloaded through an OFS route as it is below 10%. It can therefore be sold only through a block deal on the exchanges, he said.