InvestorQ : How are the preparations for the divestment of BPCL stake by the government of India?
Katherine Gonsalves made post

How are the preparations for the divestment of BPCL stake by the government of India?

rhea Babu answered.
1 year ago

While the timelines for the sale of BPCL stake by the government is yet to be known, the initial preparations are on. For example, BPCL has finalized the terms to purchase Oman Oil's 36.6% stake in Bina refinery for Rs.2400 crore. In addition, it has sold 5.8% of its 7.3% treasury shareholdings for Rs.5500 crore. In addition, it has also approved sale of its 61.7% stake in Numaligarh Refinery in Assam for Rs.9900 crore.

However, Fitch has pointed out that despite these developments, multiple steps in its stake sale process are still pending. For example, BPCL has made little progress on giving out information about bidders, valuations or potential restrictions on ownership for the new buyers. It is also not known if there will be any employee protection or asset stripping.

Some of the major steps in such cases are the security clearances from the government for the interested parties, access to the data room, commencement of due diligence process etc. In addition, government will also have to make reserve-price disclosure. This will be followed by the submission of financial bids by bidders after which the consent of the lenders for the bid will be solicited. In short there are still too many steps remaining.

In addition, the company also has $2 billion of bonds outstanding as of end-2020. Either these bonds have to be refinanced or the consent of the holders will have to be obtained in advance. Before the divestment of a major stake, there must also be clarity on the future of subsidies paid out to BPCL customers on the sale of LPG and kerosene. Private companies will not be too keen to bear social and political risks once the deal is made.