The sale of Bharat Petroleum is said to fetch $13 billion for the exchequer and other shareholders.
Bharat Petroleum Corporation Limited’s (BPCL) privatisation is facing roadblocks as bidders are finding it hard to get financial partners. Some bidders themselves are having trouble investing in the PSU, held back by sustainability rules.
The government plans to privatise the PSU by fourth quarter this fiscal, according to an exclusive interview given by the former chief economic advisor Krishamurthy Subramanian to Moneycontrol.
According to a report in Bloomberg, people familiar with the matter have said that the three suitors- the Vedanta group, Apollo Global Management and I Squared Capital- have had talks with global energy giants and sovereign and pension funds, but have been unable to finalise them as partners.
Some bidders are finding it difficult to invest due to sustainability rules that make it tougher for them to buy a stake in an oil refiner, some of the people said, anonymously to Bloomberg. Globally as more countries are trying to push for green energy, with the added pressure from investors to slash emissions, companies are holding back from making large investments in fossil fuels.
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Bidders, as well as the Indian government, also want a consortium with stronger technical and financial muscle, given the massive price tag. The sale of Bharat Petroleum is said to fetch $13 billion for the exchequer and other shareholders.
Spokesmen at the finance ministry and BPCL weren’t immediately available for a comment, while Apollo Global declined to comment to the news agency. Representatives at Vedanta and I Squared didn’t reply to the agency’s emails.
Delays from uncertainty, complexity
Last month Fitch Ratings Ltd said uncertainty over the bidder consortiums and process complexity, including valuation, may lead to potential delays in the privatisation of BPCL’s.
“Bidders are conducting due diligence, but uncertainty over the bidder consortium and process complexity, including valuation, may lead to potential delays,” Fitch Ratings Ltd. said. “We believe the risks of further Covid-19 waves and global oil and gas companies’ increased focus on energy transition lead to additional uncertainty over the timing and valuation of potentially large acquisitions in the sector.”
Looking at this it seems difficult for the government to fulfil their target of completely selling its entire 53% holding by the end of end of this financial year in March, for which it had planned to seek financial bids next month.
BPCL allowed bidders virtual access to its financial data early April, but it hasn’t progressed beyond exchanging a few queries and some initial discussions with the state-run company’s management in the past six months.Internet Explorer Channel Network