Tide Water Draws Wave of Potential Bidders


Indias plan to privatize lube blender Tide Water Oil Co. is drawing interest from international and state-owned oil companies. Six firms have submitted expressions of interest for the governments 42 percent stake in Tide Water, which claims a market share of 3 to 4 percent and which enjoyed a surge in profits last year.

As an undertaking devoted to lubricants, Tide Water is a small player compared to the giant oil majors that India is privatizing, such as Bharat Petroleum and Hindustan Petroleum. It enjoys an enviable position, however, because it commands a 10 percent share in Indias bazaar, the market segment supplying motor oil to independent garages and small retailers.

With five strategically located blending plants, Tide Water boasts two brands: its own, Veedol; and Mitsubishi, for which a 1993 technology transfer, manufacturing and marketing tie-up exists. The company fueled excitement in March by announcing that net profits for 2001 increased 136 percent to more than Rupee 100 million (U.S. $2.1 million). S. Basu, company secretary and manager of corporate affairs, was upbeat: Weve focused on the right retail businesses, rationalized production norms and shed institutional business where margins were very low.

The companies that have submitted expressions of interest in the governments stake of 64-year-old Tide Water are: Indian Oil Corp., through the recently acquired IBP (Indo Burma Petroleum); Hindustan Petroleum; Bharat Petroleum; Shell; TotalFinaElf; and Caltex, the Chevron-Texaco subsidiary. Four Star Oil Co., a subsidiary of Chevron Canada, has long been a passive partner in Tide Water with a sizeable 22 percent stake. Industry circles feel Chevron will naturally wish to consolidate its hold.

Why opt for Tide Water? IBPs Managing Director Arun Jyoti felt acquiring it would create perfect synergy as Tide Waters brands would get a platform at our considerable gas station grid and we could offer our customers a second choice in addition to our own brand, IBP-Red. Further, he added, the acquisition would give IBP a foothold in the industrial lubes arena.

TotalFinaElf India CEO Nick Wellman declined to comment until they were sure they were proceeding towards a bid. Hindustan Petroleums S. Roy Choudhury, chief general manager-direct sales, asserted his corporation was seriously considering Tide Water because its brand positioning is good and a combination of the brands of the two companies would rejuvenate existing brands.

S. Ravi, head of business development and public affairs for Shell India Private Ltd., said Shells interest stemmed from the fact that it considers the Indian downstream sector to be an attractive prospect for investment in the long term.

After a two-year glum spell that saw a sluggish economy and falling oil demand, the Indian lube industry is wearing the hint of a smile on reports of increased truck, diesel and lube sales since April. Diesel sales rose 2.2 percent from April to May and all public sector undertaking (PSU) oil companies reported high growth rates of lubricants, prompting predictions of economic recovery.

Debatable as such a claim may be, the sustained rally of PSU oil company stock on the bourses indicates investor confidence in the ongoing disinvestment process. The Petroleum Ministrys assurance that disinvestment in the highly coveted Hindustan Petroleum and Bharat Petroleum is on track, only helps.

The Ministry has already approved a proposal to launch an initial public offering in Bharat Petroleum to raise Rs. 10 billion (U.S. $205 million), thus reducing its equity in the corporation from 66 percent to 51 percent to bring it on par with its stake in Hindustan Petroleum. This move is expected to make the corporations debt-equity ratio stronger, increasing its worth during the bidding process. Hindustan Petroleum may therefore be privatized before Bharat Petroleum actually comes under the hammer. The 135-year-old Balmer Lawrie, a respected grease maker, is also slated for disinvestment soon.

After deregulation in 1993, the current privatization spree is arguably the most climactic event on Indias lube scene.

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