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BPCL privatisation: Deadline for submission of bids ends on Monday

BusinessToday.In     November 15, 2020

The process of receiving initial bids for privatisation of Bharat Petroleum Corp Ltd (BPCL) will end on Monday. Energy giants such as UK's BP Plc, Total of France and Saudi Aramco are unlikely to bid in the stake sale process of the state-run oil marketing company. The government, which is exiting BPCL by selling its entire 52.98 per cent stake, has already extended the date of putting in the preliminary expression of interest (EoI) on four occasions. The current deadline is November 16.

Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had in October told PTI that there would be no further extension of the deadline for receiving initial bids this time.

The asking price of close to $10 billion may keep BP, Total, Russian energy giant Rosneft and Saudi Arabian Oil Company (Saudi Aramco) away from bidding for majority stake in the firm, sources told PTI. The bidding process is taking place at a time when the world is moving away from conventional fuel.

The coronavirus pandemic has led to destruction of demand for conventional fuels and may speed up transition towards cleaner fuels such as hydrogen and battery-operated EVs.

BPCL shares fall over 9% as govt extends bid deadline for stake sale

Considering the uncertain demand scenario, investors are weighing if BPCL acquisition makes sense, sources added. The government's 52.98 per cent stake in BPCL is worth Rs 47,430 crore, according to Friday's closing price of Rs 412.70 on BSE.

Also, the buyer would have to spend  another Rs 23,276 crore to make an open offer for buying an additional 26 per cent stake from the public.

With BPCL annually clocking a profit of about Rs 8,000 crore, it would take 8-9 years for the investor to recover the bid amount of over Rs 70,000 crore, sources added.

Acquisition of BPCL is affordable for firms which can clock 100% rise in profit by growing the business as well as through operational efficiencies and synergies with existing business in half that timeframe.

Govt to fetch Rs 60,000 crore from BPCL, Concor, SCI, BEML sale

One such company could be Mukesh Ambani-led Reliance Industries Ltd, which operates the world's largest single location oil refining complex at Jamnagar in Gujarat and has strong ambitions to sell fuel.

However, Reliance has not disclosed its intentions about BPCL.

Reliance recently hired former BPCL chairman Sarthak Behuria and former Indian Oil Corp (IOC) chairman Sanjiv Singh. The two hirings could be connected to its plan to bid for BPCL, sources said.

Reliance can combine its Jamnagar refineries with BPCL's Mumbai, Kochi and Bina units as well as merge its 1,406-plus fuel stations with 17,138 petrol pumps of BPCL, which makes business sense, sources added.

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