The government seeks to increase ₹90,000 crore from the privatization of Bharat Petroleum Corp. Ltd. (BPCL) to about double the stock’s valuation, as the Center seeks to benchmark its price against some of its publicly traded rivals, an official said.
The government’s target price for its 52.98% stake is also based on the value of BPCL’s assets, the government official said, requesting anonymity.
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“If anyone thinks that the government will evaluate BPCL solely on the basis of its share price, then they are wrong. The government must also examine the valuation of assets. It will also need to look at the stock prices of the companies in the peer group, “he said.” The government should at least get ₹90,000 crore. BPCL’s assets are so vast, this money ( ₹45,000 crore) can easily be achieved by selling the assets of BPCL without impacting the core business. “
Besides Vedanta Group, two US funds – Apollo Global and I Squared Capital – have reportedly submitted expressions of interest for India’s second-largest fuel retailer. The Department of Investments and Public Asset Management (DIPAM) manages the privatization of BPCL, while Deloitte Touche Tohmatsu India is the transaction advisor.
BPCL stock underperformed market benchmarks, like some other public company stocks, despite markets hitting new highs. BPCL shares rose ₹2.05 or 0.54% at ₹383 on Friday, while the Sensex rose 0.25% to 47,868.98.
“We believe that BPCL has a potential value of 2x compared to the current market price in the long run, if the government provides a stable tax regime for gasoline and diesel sales, as their 16,000+ outlets can be valued at more than ₹80,000-100,000 crore based on RIL-BP and other similar worldwide agreements on retail stake sales. In addition, based on the replacement cost, the refinery and the terminal / depot network can potentially add an enterprise value of approximately ₹40,000 crore each, in addition to the value of other companies like product pipelines, LPG, industrial fuels, ATF, lubricants, gas sales and stakes in IGL and Petronet LNG, ”said Gagan Dixit, Vice President of Institutional Equity Research at Elara Capital.
“However, 2020 has seen a huge tinkering of excise duties on gasoline and diesel, which has resulted in the doubling of excise duties on diesel. This impacted BPCL’s valuation and raises concerns among potential bidders as more expensive gasoline and diesel would help develop competitive fuels such as direct use of LNG on trucks, electric vehicles , CNG sales at the expense of growing demand for gasoline and diesel, ”he added.
This sale of shares is essential to reach the government record ₹Divestment target of $ 2.1 trillion announced by the Ministry of Finance in the 2020-2021 budget. India has so far raised ₹12,225 crore from the proceeds of the divestment.
“The divestment process is being undertaken by DIPAM,” a spokesperson for India’s oil and gas ministry said in an email response to a question, adding that the request should be sent to “the relevant department.” Questions emailed to spokespersons for the Ministry of Finance, DIPAM, Vedanta Group and I Squared Capital on Monday evening went unanswered until going to press.
The successful buyer will not only hold a controlling stake in BPCL, but will also have access to a 25.77% market share in the fuel retail segment in India, in addition to 15.3% of the capacity. refining. It operates refineries in Mumbai, Kochi, Bina and Numaligarh, with a combined capacity of 38.3 million tonnes per year.
A spokesperson for Deloitte in an email response said, “We are bound by obligations of confidentiality and are unable to comment on customer specific questions.
An external spokesperson for Apollo Global said in an email response: “Apollo Global would not comment on the request sent.”
Mint previously reported that Deloitte had informed all bidders whether they qualified for the second stage of the sale process or not. Secondly, business transfer agreements will be signed with qualified bidders and site visits will be organized for BPCL’s facilities. Bidders will be allowed to consult the JI books before submitting their financial bid.