Bharat Petroleum Corporation Ltd (BPCL) is consulting the government, market regulator SEBI and Deloitte Touche Tohmatsu India LLP to avoid open offers by the new private owner in the two companies co-promoted by the state-run oil firm following strategic disinvestment.
BPCL owns 12.5 per cent in Petronet LNG Ltd, India’s biggest importer of LNG, and 22.5 per cent in Indraprastha Gas Ltd.
According to SEBI norms, a change in management control of BPCL would not only necessitate an open offer to buy further shares from retail shareholders in BPCL but also in companies promoted by BPCL.
This would require the successful buyer of BPCL to spend huge additional money for the acquisition, which could impact the valuation of BPCL, a scenario the government is looking to avert.
“We are working closely with the government, the transaction advisor (Deloitte) and SEBI to work out a solution which is acceptable to all,” BPCL finance director N Vijayagopal said at a media briefing.
BPCL, according to Vijayagopal, has no intention to pare its holding in Petronet LNG and Indraprastha Gas.
Valuation issues
Government sources said that the open offers in Petronet LNG and Indraprastha Gas would be “value destructive for BPCL”.
“It will not only create valuation issues for BPCL but also progression issues for firms promoted by it. It will create problems in LNG sourcing by Petronet and some operational issues for Indraprastha Gas,” a government source briefed on the matter said.
“The market regulator SEBI is on the same page with us on avoiding open offers in the two companies co-promoted by BPCL,” he said.
Previous open offers
SEBI had previously exempted open offers in HPCL and Dredging Corporation when they were disinvested by the government to ONGC and a consortium of four state-owned major port trusts, respectively, citing the government-to-government nature of the deal.
Industry sources said that even if the open offers are avoided, it could still pose a problem for Petronet. The new private owner of BPCL would change the structure of Petronet, which is currently 50 per cent owned by BPCL, Indian Oil, ONGC and GAIL with each holding 12.5 per cent stake. This will reduce to 37.5 per cent as the 12.5 per cent stake held by BPCL could be counted as a non-promoter shareholder category after it comes into the fold of the private owner of BPCL.
“This could pose management issues at the company,” an industry source said.
The public currently holds the balance 50 per cent in Petronet.