BP likely to sell global lubricant business, calls it 'strategic review'

British firm holds 51% stake in Castrol India valued at Rs 11,000 crore

British energy giant BP Plc may sell its global lubricant business as part of its “global strategic review,” according to a statement. 

 

BP, the ultimate holding company of Castrol India, owns a 51 per cent in the Indian company valued at ₹11,000 crore ($1.26 billion) as of today. Bankers estimate that BP’s global sale of lubricants business could fetch up to $10 billion, including India.

 

“The strategic review of Castrol will consider all options with a focus on value creation. Proceeds from any potential transaction that may arise as a result of the review will be allocated to strengthening BP’s balance sheet,” the BP statement said on Wednesday.

   

Following the global announcement, Castrol India’s shares closed flat at ₹218 on the BSE. The sale is likely to attract bidders from private equity players and other Indian rivals interested in increasing their market share, bankers said.

 

With this announcement, BP joins a growing list of foreign companies planning to sell their Indian businesses. The Netherlands-based AkzoNobel NV has put AkzoNobel India, a paint company, up for sale and is currently in talks with private equity giant Blackstone, JSW Paints, and Pidilite Industries. The non-binding offers are due by mid-March. In February last year, Novartis AG announced plans to sell its majority stake in Novartis India, a publicly listed entity. The sale has received non-binding offers from local companies, including Dr Reddy’s Laboratories, according to media reports. 

 

Castrol India is a leading lubricant company with a strong portfolio of brands, including Castrol CRB, Castrol GTX, Castrol Activ, Castrol Magnatec, and Castrol Vecton. The company operates three blending plants in India and has an extensive distribution network of 350 distributors, reaching consumers and customers through over 100,000 retail outlets.

 

According to a Bloomberg report, activist fund Elliott Investment Management, which has built up a stake worth about £3.7 billion ($4.7 billion) in BP, is demanding that it make drastic cost cuts and divestments to strengthen its future as a standalone company.

 

Elliott wants BP to reshape its business to be more like other oil majors, such as Shell Plc, by cutting spending in areas like renewable energy and making sizeable non-core asset divestments, the report said.