Why BPCL Doesn’t Plan To Sell Stake In Indraprastha Gas, Petronet LNG

A motorcylcist rides past a Bharat Petroleum Corp. gas station in Pune, Maharashtra, India. (Photographer: Dhiraj Singh/Bloomberg)

Why BPCL Doesn’t Plan To Sell Stake In Indraprastha Gas, Petronet LNG

Bharat Petroleum Corp. will not sell its investments in state-owned gas companies ahead of the planned privatisation of the refiner.

“We have no intention to sell the stake in either Indraprastha Gas Ltd. (city gas distributor) or Petronet LNG Ltd. (importer of liquefied natural gas) because we are very closely involved in this,” N Vijayagopal, director finance at BPCL, said in an interaction with BloombergQuint. “We are working in alignment with the government's interest in this regard,” he said, adding that selling stakes in the two companies will reduce the value of the refiner considerably.

BPCL, a co-promoter, owns 22.5% of Indraprastha Gas and 12.5% of Petronet LNG.

“We have a lot of synergies with these companies. Not only are we promoters, but there are a lot of other issues like cross-guarantees the OMC has given for the long-term purchase of LNG,” he said. “We have given many of our outlets for CNG sales. It is going to be very difficult to come out of this relationship and it will be very destructive for BPCL.”

Also read: Brokerages See Privatisation As Key For BPCL’s Stock; Stay Bullish After Q4

The government plans to sell its 52.98% stake in BPCL as part of the divestment process. It has received multiple bids, tweeted the secretary of the Department of Investment and Public Asset Management on Nov. 16. “The transaction will move to the second stage after scrutiny,” he said.

The current guidelines require a strategic buyer of BPCL to make an open offer of 25% once the financial bid is accepted. It also requires an open offer for BPCL board-controlled subsidiaries and associates.

A potential buyer will have to make an open offer for Indraprastha Gas and Petronet, and factor in the cost, Vijayagopal said.

“We are working with the government and the regulatory authorities to find an amicable solution which will satisfy the requirement of all the stakeholders,” he said.

BPCL on April 10 opened its data room for potential strategic buyers to conduct due diligence. “Qualified interested parties are seeing the data and a number of questions have come up; we are answering those.”

The management of the oil refiner and retailer will start meeting the prospective bidders. The company, Vijayagopal said, is not aware of the details of the buyers as all queries are routed through the transaction adviser.

Interested buyers also wanted a discussion with the senior management of BPCL but that couldn’t happen until the accounts were closed, he said, adding that BPCL’s senior team is now ready.

Also, the potential buyers wanted to physically verify assets and refineries but that won’t be possible till restrictions on international flights are lifted.

The draft sale-purchase agreement has been cleared at the highest level of the government and shared with interested parties by DIPAM, said Vijayagopal. So meetings with the management could happen by the end of June or July, and if flight restrictions are removed, bids could be in by August, he said.

Watch the full interview here:

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