Going by the Friday closing price of Bharat Petroleum Corporation (BPCL), which the government plans to privatise, the buyer will have to shell out at least Rs 60,000 crore to buy the government's 53 per cent stake, say industry experts. The valuation of BPCL was about Rs 1.1 lakh crore last week. The market expects the buyer will offer a 2-4 per cent premium to the market value. Besides, the buyer will have to make an open offer for public shareholders when they acquire over 25 per cent stake. "At the higher side, the buyer will have to spend about Rs 60,000 crore for buying the government's stake and about Rs 30,000 crore for another 25 per cent from the public," a Mumbai based banker said.
In 2017, Essar Oil, which had a refining capacity of 20 MT, a 1,000 mega watt captive power plant and 3,500 fuel stations, was sold to Rosneft and Trafigura-UCP consortium for $12.9 billion (around Rs 83,000 crore). But the buyers acquired 98 per cent of the stake. Considering the Essar Oil deal, which was then renamed Nayara Energy, the Rs 60,000 crore valuation for the government's 53 per cent stake in BPCL is justifiable.
Industry experts expect global players will come to bid for the assets as it is among the best performing public sector companies in India. "Global refining giants are looking for a foothold in the Indian market, especially when fossil fuel consumption is reducing globally with the rise of electric mobility," said an industry veteran. After the Russian government controlled Rosneft's foray into Indian market, Saudi Arabian government's company Saudi Aramco has decided to invest in the refining and petrochemical business of Reliance Industries (RIL). Aramco will spending about RS 1.05 lakh crore to acquire about 20 per cent stake in the 68 MT refining business and the petrochemical business, which includes world's largest Off-Gas Cracker complex.
The total attributable refining capacity of BPCL is about 35 million tonne (MT) annually. It has four refineries, of which, the 12 MT Mumbai refinery and the 15.5 MT Kochi Refinery are fully owned by the company. It has a 74 per cent stake in the 7.8MT Bharat Oman refinery. Oman Oil Company holds the remaining 26 per cent stake. In the 3 MT Numaligarh Refinery, BPCL holds 61.65 per cent stake. Assam Government and Oil India are the other stake holders.
It operates 15,078 fuel stations, which accounts for a quarter of the retailing market share, and 6,004 LPG distributors. In the last financial year, the company posted a 13 per cent fall in consolidated profit to Rs 8,528 crore. Sales went up 22 per cent to Rs 3.4 lakh crore.
In January 1976, the Burmah Shell group of companies was taken over by the Government of India to form Bharat Refineries Limited, which was later renamed as Bharat Petroleum Corporation Limited. About one and a half months back, BPCL's share price was around Rs 330. But it went up sharply to Rs 515 on Friday and reached closer to its all-time high of Rs 545 in December 2017. But on Monday, it fell 4.8 per cent to Rs 490 after the stock research firm CLSA has maintained its sell call on the stock with a target price of Rs 300, implying a 42 per cent downside from current levels.
The government's move of quietly repealing the legislation that had nationalised BPCL, doing away with the need to seek Parliament nod before selling it off to private and foreign firms, has courted controversy recently. The employees unions in BPCL have told BT they will start protests against the government's move to privatise the company. Deepak Bhattacharya, general secretary of BPCL Employees Union (Eastern region) said the company has created wealth for the nation. "We distributed huge dividends to the government every year. Besides, BPCL can now compete with any global company. The government is trying to sell off the company for one-time benefit," he said.