Companies

BPCL likely to merge Bharat Oman Refineries after buying out JV partner

P Manoj Mumbai | Updated on December 17, 2020

The buy out of OQ S.A.O.C is expected to improve the valuation of BPCL during the privatisation of the Maharatna PSU as it will add refining capacity directly to its fold.

The Board of Bharat Petroleum Corporation Ltd (BPCL) will meet today to approve the purchase of 36.62% equity shares it does not already own in Bharat Oman Refineries Ltd (BORL) from OQ S.A.0.C.(formerly known as Oman Oil Company S.A.O.C), smoothening the way for a potential merger of the Bina-based refinery.

“Our immediate effort is to complete the formalities and make BORL a 100 per cent subsidiary,” said an official. “Then, it becomes easy, if at all anybody wants to have a merger, whether we do it or the new owner of BPCL does it, we don’t have to ask anybody for consent except from a regulatory perspective,” he said adding that “the company is not announcing a merger or intention to merge at this stage”.

 

The buy out of OQ S.A.O.C is expected to improve the valuation of BPCL during the privatisation of the Maharatna PSU as it will add refining capacity directly to its fold.

Besides, the investor agreement with the Oman company stipulates that even with a small equity holding, it has “some control” over the JV oil refining company in terms of decision-making authority and veto powers.

BORL is listed as a JV company in the books of BPCL despite owning 63.38 per cent stake.

“Once they go out, the joint venture agreement will cease to exist, and the control will be fully with BPCL. That will eliminate the need for us to take approval from them for major decisions of BORL. That is one major impact on our buying the stake held by OQ S.O.A.C in BORL,” the official said.

There is another reason why BPCL is buying out the Oman firm from the JV.

“It will never take decisions in the interest of BPCL for BORL, which can create problems. The Oman firm has no interest to invest in the JV, or we will have to continue to invest in a company in which we have no absolute control,” the official said.

OQ S.A.O.C did not invest in expanding the refinery capacity of BORL to 7.8 million tonnes from the earlier 6 mt.

“The merger will happen, but it will not be immediately. The announcement of a merger is not there now as it requires a lot of formalities to conclude. We are only going to increase the stake to 100 per cent and avoid the complications of another partner who is not having a long-term interest in India to create issues for us and the new private owner of BPCL,” the official stated.

The Board will also consider a proposal to approach the Government of Madhya Pradesh (GoMP) for acquiring 269,00,000 warrants held by GoMP in BORL.

“The GoMP holds warrants issued by us, and that is convertible into shares. We need to get that shares also to make BORL a 100 per cent subsidiary,” he added.

Published on December 17, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor