Who Will Buy BPCL?| BPCL Privatization

Government Divesting its stake in BPCL

Introduction

The Government of India in November 2019 decided to sell its 52.98% stake in the country’s second largest oil marketing company Bharat Petroleum Corporation Ltd (BPCL) to meet its divestment target for FY21. In this article we will look at how the saga has unfolded so far and also what lies ahead.

BPCL Divestment Story

• The Finance Minister Nirmala Sitharaman in her 2020-21 Budget announced a divestment target of Rs. 2.1 Lakh Crore, which is more than thrice the target of Rs. 65,000 Crores in the previous financial year. They aim to achieve this target by selling a part of the government’s stake in behemoths like LIC, IDBI and BPCL.
• Divestment processes are strenuous and altogether time consuming. Even LICs IPO has been put off till the next financial year.
• The Government of India holds a stake of 52.98% in BPCL on behalf of the President of India, which is ~ to Rs. 47,430 Crore (as on date 18 November 2020).
• Based on grapevine talks which were quite active in the markets when the divestment was announced was that the share price could be worth around Rs. 700-800. But with the divestment procedure delayed there was no revival in interest from institutional investors. 

Shareholding Pattern of BPCL

• The government invited bids for the strategic sale of BPCL and sought Expressions of Interest (EoI) from potential acquirers.
• The Government of India set an eligibility criteria that the bidder should have a net worth of $10 Billion . Also the bidder would have to make an open offer for buying another 26% stake from the public which would cost around Rs. 23,276 Crore (as on date 18 November 2020) in addition to purchasing the government’s stake of 52.98%.
• They were many enthusiastic speculations that the potential bidders would include the likes of Reliance Industries, Saudi Aramco, UK’s British Petroleum plc, Total (France) and Russian energy giant Rosneft-led Nayara Energy. All of this conjecture was futile and in vain as none of the above conglomerates submitted an Expression of Interest.
• However some potential bidders currently considered and doing the rounds are Abu Dhabi National Oil Company and mining mogul Anil Agarwal. Billionaire Anil Agarwal might take a shining to this offer with his interest in the  oil and gas business .

Company Profile

Market Share

• Currently BPCL ranks 3rd with a 15.33% market share of India’s oil refining capacity below IOCL and Reliance Industries.  India’s Total Refining Capacity is 250 Million tonne per anum .
• BPCL accounts for 38.3 million tonne per anum with their 4 Refineries in Mumbai, Kochi (Kerala), Bina (Madhya Pradesh), Numaligarh (Assam).
• The Numaligarh refinery will be carved out of BPCL and sold to a PSU. The new buyer of BPCL will get 35.3 million tonne of refining capacity.

• Company is India’s 2nd largest Oil Marketing Company (OMC) and holds 22% of market share in terms of Domestic sales volume during FY20.
• Standalone domestic sales volume of BPCL is over 43.10 million tonne.

BPCL Divestment Road Ahead

Conclusion

The Government of India plans to spare no effort and try their best for a successful divestment of BPCL by March 2021. This strategic sale is imperative as this year has taken its toll on the government and they’ve had to absorb plenitude of revenue losses throughout. Let’s keep an eye out on how this tale evolves in the upcoming days.