When do you see the BPCL privatization happening and do you see Reliance as a solid candidate to buy BPCL?

The government made some interesting announcements pertaining to the BPCL privatization and here is what you must know about the proposed divestment.

· The government has already clarified that the last date for bidding for BPCL privatization would close on Monday 16 November and this has seen repeated postponements.

· This time around, the DIPAM Secretary, Tuhin Pandey, has already made it crystal clear that there would be no further extension irrespective of the circumstances.

· Under the government divestment plan, the government plans to sell its balance 52.98% stake in BPCL, as a block to a buyer who can also add business value.

· BPCL is India’s second largest refining and marketing company after IOCL and both these stocks gained this quarter on the back of better GRMs or gross refining margins.

· It is being discussed that British Petroleum, Total of France and Saudi Aramco may opt to stay out of the bid for BPCL, contrary to their earlier interest evinced.

· One reason for this hesitation is the open offer condition. This would take the total outlay for purchase of BPCL to $10 billion, including the open offer to shareholders.

· That effectively means that apart from shelling out Rs.47,000 crore for the 52.98% stake of the government in BPCL, the buyer will have to spend another Rs.23,000 crore.

· Under the SEBI takeover guidelines, the buyer will have to make an open offer at the same price to by another 26% from shareholders.

· BPCL earns Rs.8000 crore net profit on an annual basis mean it takes take the payback period to 10 years on an average assuming normal performance.

· This open offer requirement is one reason even Rosneft of Russia has expressed hesitation to participate in the BPCL bidding.