BPCL’s future owner to get refiner’s stake in Petronet, Indraprastha Gas

Richa Mishra |Shishir Sinha | | | Updated on: Aug 08, 2021
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Decision taken based on consultants’ advice; move seen boosting valuation

Prospective buyer of Bharat Petroleum Corporation Ltd (BPCL) will also be owner of the stake of the refiner-cum-retailer in other entities including Petronet LNG Ltd and Indraprastha Gas Ltd.

Official in the know told BusinessLine that the government will allow transfer of BPCL’s shares to the new owner post strategic disinvestment. BPCL holds between 11 to 100 per cent in around three dozen companies, including Petronet LNG.

“Based on the advice from the consultants doing the valuation of BPCL, this decision was taken. It was also felt that stake in entities like Petronet will up the valuation of BPCL,” another official said.

On November 20, 2019, the government gave in-principle approval for strategic disinvestment of its shareholding in BPCL. The decision also said that shareholding of BPCL in Numaligarh Refinery Ltd (NRL) has to be divested to a Central Public Sector undertaking. Subsequent to this, the entire equity investment NRL has been sold to a consortium of Oil India Limited- Engineers India Limited- Government of Assam during FY20-21, at a total consideration of ₹9,875.96 crore.


Reserve price fixation

While the government has not shared its valuation of BPCL, as per the extant procedure, valuation made by the advisors is only considered for reserve price fixation. In order to ensure non-collusive competitive bidding, absolute confidentiality is maintained in the valuation and the advisors are bound by the confidentiality undertaking in this regard.

With the valuation providing only a benchmark for fixation of reserve price, price discovery becomes a product of competitive bidding. The process of financial bidding is guided by the principles of transparency, fair play, promoting competition and ensuring highest degree of integrity and probity, a senior official from the Finance Ministry said, adding that th reserve price is arrived at through a due process only after the financial bids have been received.

In fact, recently, the government also allowed 100 per cent FDI under the automatic route in oil and gas PSUs which have received in-principle approval for strategic disinvestment. This is to the advantage of BPCL.

The government expects that the strategic buyer will bring funds/technology/new management etc. for optimum development of the business potential of BPCL.

During the year 2020-21, BPCL earned a profit after tax (PAT) of ₹19,042 crore as against PAT of ₹ 2,683 crore during 2019-20. The higher profit during the year is mainly on account of the sale of equity shares of Numaligarh Refinery Limited (NRL), higher inventory gains and adoption of new income-tax rat.

During the year 2019-20, in view of the steep reduction in crude oil prices and depreciation of th Indian rupee vis-à-vis US dollar, BPCL suffered huge inventory and foreign exchange losses, resulting in lower profit. During the year 2016-17, 2017-18 and 2018-19, BPCL’s PAT was ₹8,039 crore, ₹7,976 crore and ₹7,132 crore, respectively. Since the profitability of BPCL is exceptional in both 2019-20 and 2020-21 due to reasons explained above, it would not be appropriate to compare the profit of these years t to judge BPCL’s operational performance.

Published on August 09, 2021

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