Bidding War for India’s Plums?


Come April 2002, the Indian petroleum industry will be deregulated, including the four major public sector undertakings: Indian Oil Corp., Hindustan Petroleum Corp. Ltd., Bharat Petroleum Corp. Ltd., and Indo Burma Petroleum. In early February Indian Oil Corp. acquired a controlling stake in Indo Burma.

Bharat and Hindustan, which together control 30 percent of Indias lubricant market, go on the block in July. The bidding process promises nail-biting drama as the likes of British Petroleum, Shell, ChevronTexaco, Kuwait Petroleum Corp., Petronas and Phillips test the waters, together with Indias aggressive private player, Reliance.

Indian Oil Corp.s February bid for 33 percent of Indo Burma Petroleum (of a total 59 percent government holding) raised eyebrows. IOCs bid was a whopping Rupee 11,536 million (U.S. $237 million), almost double that of Royal Dutch/Shell, the next-highest bidder at Rs. 5,950 million. Some analysts felt that the high IOC bid created a lucrative benchmark for the mega-corporations Hindustan Petroleum and Bharat Petroleum.

Justifying its bid, IOC Chairman and Managing Director M.A. Pathan pointed out that Indo Burma Petroleum, an oil marketing outfit, picked up 80 million tons of diesel and petrol from IOC each year. Protecting this off-take and adding Indo Burmas 1,540 retail outlets to its own 7,600-strong chain were imperatives. The cost of setting up a similar number of fresh outlets alone, claimed IOC, would cost Rs. 15,000-17,000 million (roughly U.S. $300 to $350 million) and take about five years.

IOC has formed a synergy committee to examine areas of duplication of effort, and Indo Burma employees are jubilant that their jobs are not on the line. Reports indicate that Indo Burma lubricants (lube market share: 2 to 3 percent) will continue to be marketed under the Indo Burma brand for now.

The Indo Burma Petroleum disinvestment boosted Indo Burmas stock prices as well as those of Bharat and Hindustan Petroleum to all-time highs.

Close on the heels of the furor caused by one giant public sector company acquiring another, the governments Cabinet Committee on Disinvestment debarred IOC from bidding for Hindustan and Bharat, citing unfair monopoly. Cautioning that this would restrict competition, thus driving down the price of these corporations, IOC sought a review of the ban. Though IOC is currently out of the running, the Petroleum Ministry has lent tacit support to IOCs claim.

Both high profit-earners, Hindustan Petroleum and Bharat Petroleum together account for 40 percent of the petroleum retail business, command 20 percent and 10 percent, respectively, of lube market share, and own a clutch of refineries.

Control of Hindustan and Bharat will surely fuel the ambitions of any corporation — establishing a retail network anew is cumbersome and obtaining space in prime urban locations almost impossible. In addition to the multinational oil companies which are expected to bid, Indias cash-rich public sector Oil and Natural Gas Commission and Gas Authority of India Ltd. are also reportedly in the fray. Both suitors stand to gain enormously by acquiring refining and marketing facilities.

Reliance is anxious to acquire a retail network; it has a 27 million ton refinery and post-deregulation, public sector companies will not be able to guarantee lifting of products. Recently, the Reliance Group decided to merge its two flagship companies, Reliance Industries Ltd. and Reliance Petroleum Ltd. This created a Rs. 580 billion (U.S. $11.9 billion) behemoth that qualifies for the exclusive Forbes 500 listing, where hitherto IOC was the only Indian representative. The merger makes sound commercial and strategic sense; a stronger balance sheet will help raise resources to bid for the two hugely attractive prizes, Bharat and Hindustan. In case the Reliance bid fails, the added financial muscle will help in setting up a distribution chain.

Insofar as retail gas stations are captive outlets for lube sales, the future control of Hindustan and Bharat Petroleum will have considerable impact on the lubricants scene. Clearly, the Indian oil industry is on the threshold of a new era.

Public Sector Oil Company Present Govt. Stake
Indian Oil Corp.

81 percent

Bharat Petroleum Corp.

66 percent

Hindustan Petroleum Corp.

51 percent

Indo Burma Petroleum

26 percent


Copyright 2002 LNG Publishing Co., Inc. All rights reserved.
Tim Sullivan, Editor. Lube Report, Lubes’n’Greases Magazine and Lubricants Industry Sourcebook are published by LNG Publishing Co., Inc., 6105-G Arlington Blvd., Falls Church, Virginia 22044 USA. Phone: (703) 536-0800. Fax: (703) 536-0803. Website: For sponsor information contact Gloria Steinberg Briskin at (800) 474-8654 or (703) 536-7676 or
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