BPCL Privatisation: Government Extends Bidding Deadline Till Nov. 16

The govenmhas for the fifth time extended the deadline for submission of initial bids for buying Bharat Petroleum Corp. Ltd. (BPCL), privatisation of which will aid the government’s push to achieve its divestment target for 2020-21.

Interested parties can now place their bids by Nov. 16.

While the Union Cabinet had in November last year approved sale of the government’s entire 52.98% stake in BPCL, expressions of interest—or bids—were first invited on March 7. The bidding deadline was then extended to May 2, June 13, July 31, Sept. 30 and now Nov. 16.

"In view of further requests received from the interested bidders and the prevailing situation arising out of Covid-19 pandemic, the last date for submission of EoIs is further extended to Nov. 16, 2020 (by 5:00 pm)," the government’s Department of Investment and Public Asset Management, or DIPAM, said in a notice on Wednesday.

The government is keen to close the BPCL stake sale before March 31, 2021, to help meet the record Rs 2.1 lakh crore disinvestment target for 2020-21. That now looks doubtful as after EoIs come in, the government will open a data centre for interested bidders to conduct due diligence, following which financial bids will be called, industry sources said. The financial bids will have to be evaluated and approved by the Union Cabinet and the transaction will close once the payment is made.

At Wednesday's trading price of Rs 360.55 on the BSE, BPCL has a market capitalisation of about Rs 78,300 crore. At this price, the government's stake is worth over Rs 41,436 crore. The acquirer will also have to make an open offer to minority shareholders for buying up to 26% stake at the same price.

The Government of India has proposed strategic disinvestment of its shareholding in BPCL—114.91 crore equity shares, or 52.98% of equity share capital—along with the transfer of management control to a strategic buyer (except BPCL's equity stake of 61.65% in Numaligarh refinery in Assam), the notice inviting the offer stated.

The Numaligarh refinery will be sold to a state-owned oil and gas firm, most likely Oil India Ltd. and Engineers India Ltd.

The bidding for BPCL will be a two-stage affair, with qualified bidders in the first EoI phase being asked to make a financial bid in the second round. India’s public sector undertakings "are not eligible to participate" in the privatisation, the offer document stated. Any private company with a net worth of $10 billion is eligible for bidding. A consortium of not more than four firms will be allowed to bid.

According to the bidding criteria, the lead member of the consortium must hold a 40% stake and others must have a minimum net worth of $1 billion. Changes in consortium are allowed within 45 days, but the lead member cannot be changed.

BPCL will give its buyer ready access to 14% of India's oil refining capacity and about one-fourth of the fuel market share in the world's fastest-growing energy market.

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% of India's total refining capacity of 249.4 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. BPCL also owns 16,814 petrol pumps and 6,143 LPG distributor agencies in the country. Besides, it has 51 LPG bottling plants. The state-run oil marketer distributes 21% of the petroleum products consumed in the country by volume and has 61 out of the 256 aviation fuel stations in the country.

The government has appointed Deloitte Touche Tohmatsu India Llp as its transaction adviser for the strategic disinvestment process.