The fate of disinvestment of Bharat Petroleum Corporation Ltd (BPCL) hinges on better valuation.
While the various committees formed by the inter-ministerial group have been working finer details for the disinvestment, valuation would be the key to finalise the bidder as effort is to get maximum value, a senior government official told BusinessLine.
The prevailing market conditions is making the government tread cautiously with the process, though it wants to complete the process in next four months. According to Preliminary Information Memoradum put out by DIPAM, Ministry of Finance, BPCL is second largest oil marketing company in India with a market share of 21 per cent in the financial year 2018-19 and has third largest refining capacity.
The company’s share price was ₹403.75 during mid-trading on Monday. Based on this price, the government could get over ₹46,400 crore which is less than one-fourth total disinvestment (including divestment of its stake in public sector banks and financial institutions) target of ₹2.10-lakh crore and less than half of disinvestment target (₹1.20-lakh crore) minus estimated proceed from sell-off in IDBI and LIC.
Plans to sell 52.98% stake
The government intends to sell its entire stake of 52.98 per cent, or over 114.91 crore shares in BPCL. It, however, will not include BPCL’s 61.65 per cent stake in Numaligarh Refinery Limited. PIM for inviting EoIs was issued on March 7, and May 2 was set as the date for submission of bid, but later extended to June 13, July 31, September 30 and finally to November 16.
The government has received three Expression of Interests (EoIs) including one from Anil Agarwal’s Vedanta and one each from two international funds. Now, EoIs would be used for pre-qualifying the interested parties in accordance with eligibility criteria and disqualification conditions. Those qualify, would be allowed to participate in Stage-II, where Request for Proposal and financial bids will be submitted. One quoting highest value will ultimately get BPCL.
A consortium approach
Though major international players seem to be missing in EoIs received, sources in the know said there is a strong sense coming that the potential bidders may opt for a consortium approach where some big names could participate.
The government has set minimum net-worth criteria for interested bidder at $10 billion (₹75,000 crore approximately), interested party could be any private limited company, public limited company, Limited Liability Partnership (LLP), SEBI-registered Alternative Investment Fund (AIF) or a company/a fund incorporated outside India (eligible to invest in India). Bidders can be sole or as a consortium.
Management/employees of BPCL can also participate in the process, but such employees will have to incorporate a company which only can submit the EoI, either itself as a sole IP or as a member of a consortium. Also, the company will need to fulfil the net-worth criteria.