Vedanta Group submits EOI to buy government's entire stake in BPCL

Anil Agarwal-led Vedanta Group said on Wednesday that it has submitted an expression of interest (EoI) for buying 52.98 per cent government stake in Bharat Petroleum Corporation (BPCL). 

“Vedanta’s EoI for BPCL is to evaluate potential synergies with our existing oil and gas business. The EoI is at a preliminary stage and is exploratory in nature,” said a company spokesperson. 

At least three to four players have reportedly submitted EoIs for the privatisation process of BPCL. The deadline for submission was Monday, but the government has not officially revealed any names. 

Vedanta has been venturing into new business segments ever since it bought Cairn India in December 2011. It also branched out into gold mining. It also acquired the control of Electrosteel Steels under a resolution plan, thereby foraying into the steel sector in 2018. However, industry experts indicate that with the recent failure of the delisting process and the company sitting on a debt-pile of reportedly over Rs 1.25 trillion, the acquisition of BPCL may not be easy for the metals-to-mining conglomerate. 

According to rating agency S&P Global, the failed delisting has narrowed the refinancing options for its parent company Vedanta Resources, raising risks over the company’s ability to sustainably service its debt beyond the next 12 months. Vedanta’s scrip was up 1.4 per cent on Wednesday at Rs 108.85. The bidding for BPCL includes two stages: one, participation of qualified bidders in the EoI stage; and two, financial bids. Any private company with a net worth of over $10 billion will be eligible for bidding, or a consortium of not more than four firms will be allowed to participate. 

Though Adani Group is another big corporate name that is believed to have evinced an interest in BPCL, a group company Adani Gas has clarified on the BSE that there are no pending information or announcements to be made. When asked a specific query on whether the group has placed an EoI, an Adani Group spokesperson refrained from commenting. 

Adani has a tie-up with French major Total for retailing both natural gas as well as liquid automobile fuel. A Total spokesperson for India, however, said the local branch was not aware of any EoI being submitted for BPCL.

The sale of BPCL is crucial to meet the divestment target of Rs 2.1 trillion for the current financial year. According to reports, other than Vedanta, some private equity funds and/or pension funds have also placed EoIs. 

A day after the EoI deadline, the BPCL stock closed at Rs 394.45 on Tuesday. The news of Vedanta placing an EoI, however, did not enthuse investors, with the stock price falling 2.85 per cent on Wednesday to Rs 383.2.

According to multiple sources, major players like Reliance Industries, Saudi Aramco, Rosneft, and ExxonMobil had shied away from the bidding process. 

It was in November last year that the Union Cabinet had cleared the sale of the government’s entire stake in BPCL. Following this, EoIs were invited from investors on March 7. 

Based on the current market capitalisation of Rs 83,125.8 crore, the value of government share’s in BPCL comes to around Rs 44,040 crore. For investors, around 35.3 million tonnes of refining capacity, 16,492 retail outlets, and 72 million LPG customers will be on offer.

The government’s plan is to sell its entire shareholding in BPCL comprising 1.15 billion equity shares, with the transfer of management control to a strategic buyer, excluding the company’s 61.65 per cent in the Numaligarh Refinery in Assam. 

BPCL operates four refineries in India — Mumbai Refinery, Kochi Refinery, BORL-Bina Refinery (Bharat Oman Refineries) and Numaligarh Refinery (1999) with a combined crude oil refining capacity of 38.3 million tonnes per annum. The company runs 24 per cent or 17,138 of the total 71,843 retail outlets in India. The company also has a share of 26 per cent of the total 285 million liquefied petroleum gas consumers in India.