NRL sale won't help BPCL valuation; proceeds to go as special dividend

The stake sale of Numaligarh Refinery (NRL) to a consortium headed by Oil India (OIL) will pave the way for the disinvestment of Bharat Petroleum Corporation (BPCL). But it will not affect the valuation the Centre is hoping to achieve with the privatisation of the Maharatna public sector undertaking.

“The decision of the Government of India was that BPCL will be sold without NRL. I do not think that the valuation of NRL is going to impact the valuation of BPCL in any way,” Vijayagopal N, director (finance) at BPCL, told Business Standard. “Given the way we have done the (NRL) valuation, arrived at the consideration, and speed at which we have executed this transaction, this will im­prove the image of BPCL and the govt’s decision-making powers,” he added.

The BPCL board had cleared the bids submitted by the OIL-headed consortium on March 1. BPCL will likely rake in Rs 9,875.96 crore from the sale of its 61.65-per cent stake in NRL to this consortium and the Assam govern­ment.“This is a positive development from a BPCL privatisation point of view. After this, BPCL will be left with three refineries. We are optimistic that BPCL will be privatised soon,” said Sumit Pokharna, research analyst-oil and gas sector and vice-president, Kotak Securities. Vijayagopal said the proceeds from the NRL stake sale will be used to fund the acquisition of Oman Oil Company’s shares worth Rs 2,400 crore in Bharat Oman Refinery. The balance amount may be paid to the Centre as a special dividend and to other existing shareholders of BPCL.

According to a CLSA report, the current NRL valuation is 16 per cent lower than what they ascribe in their BPCL sum-of-the-parts. Responding to a qu­ery on the valuation of NRL, Vijay­agopal said the amount quoted by the OIL consortium is more than the indicative price BPCL had estimated for this stake. He added that valuation is a ma­tter of perception and that Deloitte is the transaction advisor for BPCL in this deal.

Commenting on how BPCL’s exit from NRL will impact the consolidated gross refinery margins (GRMs) of the group, Vijayagopal said, “NRL’s GRM is comparable with the GRMs of our operating firms, except for the Northeast be­n­efit they enjoy. If you knock out the be­nefit of excise duty, in April-Dece­mber 2020, NRL’s GRM was $1.44 per barrel. Therefore, we are not affected by that.”

GRM is the gain per barrel of crude oil processed by a refinery. It’s a benchmark to assess performance. A higher GRM means better margins. The Centre also offers a 50 per cent excise duty rebate on petrol and diesel from refineries in the Northeast. This significantly improves their performance by allowing higher gains. “We have also entered into a long-term binding agreement with NRL for offtake of products which come out of NRL for the next 15 years at its existing capacity. BPCL’s marketing of products in the Northeast will not be affected by the stake sale,” he added.

NRL will predominantly be giving BPCL petrol, diesel and liquefied petroleum gas under this agreement. Com­menting on the privatisation of BPCL after the NRL stake sale, Vijaya­gopal said, “The BPCL stake sale position is continuing. The data room is ready and the Department of Invest­ment and Pu­blic Asset Manage­ment will now have to give the names of qualified bidders who can come and visit the data room.”

On the BSE, the scrip closed at Rs 469, higher 3.1 per cent over the previous close. Intra-day, it touched 52-we­ek high value of Rs 482.40, up 6.04 per cent.