India’s government invited bids to buy its almost 53 percent stake in Bharat Petroleum Corp. Ltd., an oil and gas company that is one of the country’s largest lubricant suppliers and one of four domestic base oil producers.
The government wants to sell all of its 1.2 billion equity shares, which constitute a 52.98 percent stake in the company, to a strategic buyer, according to the Department of Investment and Public Asset Management.
BPCL operates refineries in four locations: Mumbai; Kochi, in the state of Kerala; Numaligarh; and Bina in the state of Madhya Pradesh. They have combined capacity to process 38.3 million metric tons of crude oil per year, which is 15 percent of India’s total capacity. The Mumbai refinery has a 180,000 t/y API Group II base oil plant, which it plans to expand.
Potential domestic or foreign suitors meeting the eligibility criteria set by the government can submit their expression of interest by May 2, according to the bid document posted on the department’s website. The department is the Ministry of Finance’s nodal agency advising the federal government in the financial restructuring of public sector units and also for seeking investment via capital markets.
As reported, India’s Cabinet Committee on Economic Affairs, led by Prime Minister Narendra Modi, in November 2019 approved in principle divestment of stakes from select central public sector enterprises, including BPCL, the country’s second-largest oil marketing company. The government plans to use the funds from stake sales to finance social sector and developmental programs.
Bidders must have a minimum net worth of U.S. $10 billion. Indian companies in which the government owns stakes of at least 51 percent are not eligible to participate.
Consortiums may submit bids but should have a maximum of four members, and the lead member must contribute at least 40 percent equity. Other members must have a minimum net worth of U.S. $1 billion, while the cumulative net worth of the consortium should meet the $10 billion criteria.
The government laid out a two-phase sales process – the first being global expression of interest. In the second phase, suitors determined to be qualified will be asked to submit financial bids.
The government will fix a reserve price for the sale after receiving the bids from potential suitors, and the highest bidder will be selected after evaluating the bids. The successful bidder of state-run BPCL, which is listed on stock exchanges in India, will also have to make an open offer to other shareholders for acquiring another 26 percent stake in the company, and put the money in escrow for the entire open offer.
According to local media, global oil majors such as Saudi Aramco, ExxonMobil, Rosneft, Royal Dutch Shell, Total SA, Abu Dhabi National Oil Co. and mining conglomerate Vedanta Resources are all interested in the government’s stake.
The proposed sale doesn’t include BPCL’s 61.65 percent stake in Numaligarh Refinery Ltd., the largest producer of paraffin wax in the country, according to the document. That shareholding will transfer to another state-owned company operating in the oil and gas sector.
BPCL, which sells MAK-branded lubricants, is one of the four largest lubricant suppliers in the country, commanding a 22 percent market, according to the document. The Mumbai-based supplier also has tie-ups with major original equipment manufacturers such as Tata Motors, Honda and TVS and a retail chain of more than 14,800 fuel stations.
The company’s competitors in the finished lubricants market include national oil companies Hindustan Petroleum Corp. and Indian Oil Corp., as well as private players such as Castrol India Ltd., Tide Water Oil Co. and Gulf Oil Lubricants India Ltd.