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State-run Bharat Petroleum Corporation Ltd (BPCL) plans to raise $2 billion (roughly Rs 12,282 crore at Wednesday’s rate) through a medium-term note programme. Medium term notes generally mature between five and ten years.
In an exchange filing on Wednesday, BPCL said it has set-up a Medium Term Note (MTN) programme “to facilitate the raising of funds on a regular basis from the international debt capital markets. The aggregate nominal amount of notes outstanding under the programme will not exceed $2 billion (or its equivalent in other currencies).”
The filing added that the notes were assigned a 'BBB-' rating by Fitch and a provisional (P) Baa3 rating by Moody's Investors Service.
BPCL is the third-largest refiner in the country with a capacity of 30.5 million tonnes a year (mtpa), accounting for 14 per cent of capacity in India, and the second-largest marketer of petroleum products with a 21 per cent market share.
In its ratings report, Fitch noted that BPCL continues to sell public distribution kerosene and household LPG at below market prices under a regulated pricing regime, although diesel prices were deregulated in October 2014. “We believe that BPCL continues to be a strategically important entity for the state.”
The company has also outlined a fairly high capital expansion plan of over Rs 30,000 crore over the next four years, of which Rs 16,500 is for the expansion of the Kochi refinery to 15.5 mtpa from the current 9.5 mtpa. The intended capex, the report said, is likely to lead to continued negative free cash flows over the next four to five years.
The government has been funding BPCL’s under recoveries (the difference between market prices and regulated prices) partly through direct budgetary support and partly by directing upstream oil companies to provide discounts to BPCL. Because of its close association with the government with regard to under recoveries, Fitch said BPCL's rating matches India’s BBB-sovereign rating and a change in the countrys’ rating will affect the company as well.
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