Bharat Petroleum Corporation Ltd (BPCL) on Friday said no decision has yet been taken to sell its stake in Petronet LNG and Indraprastha Gas to help the company’s owner avoid making an open offer for the two gas companies.
V R K Gupta, Chief Financial Officer, BPCL, said market regulator SEBI has not yet responded to an application made for exempting the new owner of BPCL from making an open offer to shareholders of Petronet and IGL.
BPCL holds 12.5 percent of the shareholding in India’s largest liquefied natural gas importer, Petronet, and a 22.5 percent stake in city gas retailer, Indraprastha Gas Ltd (IGL). It is a promoter of both the listed companies and holds board positions.
As per the legal position evaluated by the Department of Investment and Public Asset Management (DIPAM) – the department running the process for the sale of the government’s entire 52.98 percent stake in BPCL – the acquirer of BPCL will have to make open offers to the minority shareholders of Petronet and IGL for the acquisition of 26 percent stake.
To bail out the new owner of BPCL spend additional Rs 19,100 crore in open offers for firms where it will have no operation control, it was suggested that BPCL sell a part of its shareholding in the two firms and shed promoter status.
“There is no decision taken as of date but we are working with the Government of India to protect the interests of BPCL,” VRK Gupta said at an investor call. “No decision on this aspect as on date.”
BPCL does not want to pare down its stake in either IGL or Petronet as it sees it as a value destruction proposition.
He said the company and the government are working with SEBI to see that the requirement of the open offer is avoided.
Bharat Petroleum made a formal application seeking exemption from the open offer.
SEBI, he said, has so far not responded. “We are still working with the Government of India to protect the interest of BPCL.”
Since BPCL is a promoter of the two companies and because there is a change in ownership of the promoter firm, an open offer is triggered under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
The thinking in the government is that the open offers for Petronet and IGL may deter bidders who are mostly eyeing BPCL’s oil refining assets and 22 percent share of the fuel marketing business it commands, sources said.
The government’s 52.98 percent stake in BPCL is valued at about Rs 52,000 crore at the current share price. The requirement for making an open offer for an additional 26 percent to minority shareholders of the company will cost an additional Rs 25,600 crore.
On top of it, an open offer for a 26 percent stake in IGL would cost the acquirer an additional Rs 9,700 crore and a similar offer for Petronet would cost about Rs 9,400 crore.
To avoid an open offer, the Securities and Exchange Board of India (SEBI) is being pursued to give exemption as already done when ONGC acquired a government stake in HPCL.
But in the case of the ONGC-HPCL deal, the promoters of both the firms were the same i.e. the Government of India and there wasn’t a change of ownership per se.
Gupta said a virtual data room has been opened for the qualified bidders to do due diligence on the company. BPCL has answered some queries raised by the bidders and a few others are yet to be answered.
Mining-to-oil conglomerate Vedanta and private equity firms Apollo Global and I Squared Capital’s arm Think Gas is in the race to buy the government’s stake in BPCL.
The stake sale in India’s second-largest fuel retailer is crucial to raise a record Rs 1.75 lakh crore from disinvestment proceeds in the fiscal year 2021-22 (April 2021 to March 2022).
BPCL will give the buyer ownership of around 15.33 percent of India’s oil refining capacity and 22 percent of the fuel marketing share.