Vedanta confirms bidding for govt's stake in BPCL

Mining conglomerate Vedanta has put in a preliminary expression of interest (EoI) for buying the government's stake in Bharat Petroleum Corp Ltd (BPCL), for which a major foreign player too is said to be in race.

A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources submitted an EoI before the close of deadline on November 16.

"Vedanta's EoI for BPCL is to evaluate potential synergies with our existing oil and gas business," the company said in a statement.

"The EoI is at a preliminary stage and exploratory in nature."

Sources in the department handling the sale said the EoI has been put in by a special purpose vehicle or SPV floated by Vedanta Ltd and Vedanta Resources.

They also stated that a major foreign player was among the three-four entities whose EoIs were received by the close of the bidding on November 16.

The other potential investors are foreign funds but their identity was not immediately disclosed.

The government is selling its entire 52.98 per cent stake in India's second largest fuel retailer as part of plans to raise a record Rs 2.1 lakh crore from disinvestment proceeds in 2020-21 (April 2020 to March 2021).

But share price of BPCL has plunged by nearly a fourth since the time the strategic sale was approved in November last year.

At Wednesday's closing price of Rs 383.20 on BSE, the government's 52.98 per cent stake in BPCL is worth just over Rs 44,000 crore.

Also, the acquirer would have to make an open offer for buying another 26 per cent stake from the public, which would cost about Rs 21,600 crore.

Vedanta's interest in BPCL stems from its USD 8.67 billion acquisition of oil producer Cairn India nearly a decade back.

The company produces oil from oilfields in Rajasthan which are used in refineries such as those operated by BPCL to turn them into petrol, diesel and other fuels.

The government had at the close of bidding stated that "multiple" EoIs had been received.

It, however, did not reveal the identity of the bidders.

Tuhin Kanta Pandey, secretary, Department of Investment and Public Asset Management (DIPAM), which is handling the strategic sale, had tweeted on November 16 that the transaction advisors for the sale of government's 52.98 per cent stake in BPCL have reported receiving "multiple expressions of interest."

"The transaction will move to the second stage after scrutiny by TA," he had said.

TA stands for transaction advisor.

"Strategic disinvestment of BPCL progresses: Now moves to the second stage after multiple expressions of interest have been received," Finance Minister Nirmala Sitharaman had also tweeted on the same day.

Neither of them, however, gave the number of bids received or the names of the bidders.

Reliance Industries, which was considered a potential bidder as BPCL would have added 22 per cent fuel market share to its fledgling retail business and made it the nation's number one oil refiner, did not put in a bid.

Saudi Arabian Oil Company (Saudi Aramco), which had been keen to enter the world's fastest-growing fuel market, too did not put in an EoI.

UK's BP plc and Total of France -- which have plans to foray into the Indian fuel market -- had previously ruled themselves out of the BPCL race as they did not want to add oil refining assets when the world was moving away from liquid fuels.

Russian energy giant Rosneft-led Nayara Energy, which operates a 20 million tonnes oil refinery at Vadinar in Gujarat and also has 5,822 petrol pumps, was considered a potential bidder for BPCL but reports last month had indicated it was no longer keen.

Abu Dhabi National Oil Co (ADNOC), which has ambitions for Indian market, too was considered a potential bidder but it was not immediately known if it had put in an EoI.

Sources said transaction advisors will now evaluate the bidders to ascertain if they meet the qualifying criteria and have the financial muscle to do the acquisition.

This process may take two-three weeks, thereafter request for proposal (RFP) will be issued and financial bids sought.

BPCL will give the buyer ownership to 15.33 per cent of India's oil refining capacity and 22 per cent of the fuel marketing share.

BPCL operates four refineries in Mumbai (Maharashtra), Kochi (Kerala), Bina (Madhya Pradesh), and Numaligarh (Assam) with a combined capacity of 38.3 million tonnes per annum, which is 15.3 per cent of India's total refining capacity of 249.8 million tonnes.

While the Numaligarh refinery will be carved out of BPCL and sold to a PSU, the new buyer of the company will get 35.3 million tonnes of refining capacity -- 12 million tonne Mumbai unit, 15.5 million tonne Kochi refinery and 7.8 million tonne Bina unit.

It also owns 17,138 petrol pumps, 6,151 LPG distributor agencies and 61 out of 256 aviation fuel stations in the country.

BPCL is India's second-largest oil marketing company with a standalone domestic sales volume of over 43.10 million tonnes and a market share of 22 per cent during FY20. It is India's sixth largest company by turnover.

Its petrol pumps sell more fuel than the industry average -- BPCL pumps sell 124 kilolitres per month as compared to the industry average of 116, according to the company website.

The firm also has upstream presence with 26 assets in nine countries such as Russia, Brazil, Mozambique, the UAE, Indonesia, Australia, East Timor, Israel and India.

It is also making a foray into city gas distribution and has licences for 37 geographical areas.