BPCL tanks 6% as govt extends deadline to submit EoI to November 16

 Shares of Bharat Petroleum Corporation Limited (BPCL) slipped 6 per cent to Rs 363 on the BSE in the intra-day trade on Wednesday after the government extended the deadline to submit expression of interest (EoI) for the company's privatisation to November 16, 2020.

The government on March 7, 2020, had issued a Preliminary Information Memorandum document (PIM) for inviting Expression of Interest (EOI) for strategic disinvestment of BPCL. "In view of further requests received from the Interested Bidders (IBs) and the prevailing situation arising out of Covid-19 pandemic, the last date for submission of EoIs is further extended to 16th November, 2020 (by 5.00 PM)," the circular said. CLICK HERE FOR RELEASE.

Meanwhile, according to a Reuters report, Rosneft and Saudi Aramco are unlikely to bid in the privatisation of the state-owned refiner.

A Rosneft source told the news agency that the company will not buy BPCL, while another source said the Russian oil major would only be interested in BPCL's marketing business which is comprised of fuel depots and more than 16,800 fuel stations. READ MORE

The government proposes to sell its entire shareholding in BPCL, comprising 1.149 million equity shares which constitutes 52.98 per cent of BPCL's equity share capital, along with transfer of management control to a strategic buyer as part of its strategic disinvestment (except BPCL's equity shareholding of 61.65 per cent in Numaligarh Refinery Ltd), the notice inviting offer had said.

At 11:18 am, BPCL was trading 5.5 per cent lower at Rs 365 on the BSE, as compared to 0.19 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped five-fold with a combined 16.3 million equity shares were changing hands on the counter on the NSE and BSE till the time of writing of this report.

BPCL privatisation: EOI deadline extended again; this time till Nov 16

 The government has decided to extend the deadline for bidding for the privatisation of Bharat Petroleum Corporation (BPCL) for the fourth time in a row from September 30 to November 16, following requests from interested parties citing the pandemic situation.

The Department of Investment and Public Asset Management (DIPAM) said in a notification that 'in view of requests from interested bidders and the prevailing situation arising out of Covid-19 pandemic, the last date for submission of Expression of Interests (EoIs) is further extended to 16th November 2020 (by 5.00 PM).' According to a source aware of the development, prospective bidders had indicated that it would be difficult for them to travel from respective countries, to do the physical due diligence during the time of Covid and to evaluate the assets.

The Cabinet had approved the sale of government's entire 52.98 per cent stake in BPCL in November last year. Offers seeking expression of interest (EoI), or bids showing interest in buying its stake, were invited only on March 7. Based on the current market cap of Rs 79503.11 crore, the value of 52.98 per cent stake in the company is expected to be around Rs 42,120.7 crore. Initially, the EoI submission deadline was May 2, but on March 31 it was extended up to June 13 and then to July 31. Later, it was extended to September 30. According to the notice inviting offer, the government's plan is to sell its entire shareholding in BPCL comprising of 1.15 billion equity shares, with the transfer of management control to a strategic buyer, excluding the company's 61.65 per cent in Numaligarh Refinery in Assam.

The company's stakes in Numaligarh refinery is expected to be sold to another public sector undertaking. So far, a consortium of state-run Oil India (OIL) and Engineers India (EIL) has shown interest in taking up BPCL's 48 per cent stake in Numaligarh. The remaining stake would be sold to the Government of Assam, to increase the state's share to 26 per cent in the venture. N Vijayagopal, director (finance) of BPCL said that the data room for Numaligarh stake sale is open and so far it has got interests from OIL and EIL. On the other hand, the company is also looking to buy the stake of Oman Oil Company in Bharat Oman Refineries (BORL).

The bidding for BPCL includes two stages, one participation of qualified bidders in the EOI stage and then financial bids. Any private company having a net worth of over $10 billion will be eligible for bidding, or a consortium of not more than four firms will be allowed to participate. However, state-run companies are not allowed to participate in the process.

Government likely to extend deadline for BPCL bidding for third time

The government is likely to extend the deadline for bidding for the privatisation of Bharat Petroleum Corporation (BPCL) for the third time in a row, from the current date of July 31.
According to sources, the extension of the timelines for expression of interest (EoI) may well be until international airline services are back in place, as a lot of prospective bidders have expressed concerns regarding the current situation.
An empowered group of secretaries, headed by Cabinet Secretary Rajiv Gauba, is set to take up the issue in a meeting on Thursday. The other members of the committee include Niti Aayog chief executive officer Amitabh Kant and Tuhin Kumar Pandey, secretary of the Department of Investment and Public Asset Management (DIPAM).
The meeting will discuss the formalities and timelines of disinvestment. "It is expected that the timelines may be further extended from the current deadline of July 31. Hence, it may even be more than a month," said a source aware of the development.
ALSO READ: As revenue dips in Covid times, govt sets ball rolling for BPCL sale
The committee will also take into account a lot of concerns raised by prospective bidders on the back of Covid-19 pandemic, including a timeline extension.
A major roadblock before international investors is the shutdown of flights. According to industry experts, for any investor to place bids will have to come to the country, meet officials and discuss things with BPCL management and also physically visit the sites and inspect assets.
"In BPCL's case, this has not happened and this is one of the major concerns before the overseas players," said a source.
The Cabinet had approved the sale of government's entire 52.98 per cent stake in BPCL in November last year. Offers seeking expression of interest (EoI), or bids showing interest in buying its stake, were invited only on March 7.
Initially, the EoI submission deadline was May 2, but on March 31 it was extended up to June 13 and then to July 31. According to the notice inviting offer, the government's plan is to sell its entire shareholding in BPCL comprising of 114.91 crore equity shares, with transfer of management control to a strategic buyer, excluding the company's 61.65 per cent in Numaligarh Refinery in Assam.
The company's stakes in Numaligarh refinery is expected to be sold to another public sector undertaking. So far, a consortium of state-run Oil India (OIL) and Engineers India (EIL) has shown interest in taking up BPCL's 48 per cent stake in Numaligarh. The remaining stake would be sold to the government of Assam, to increase the state's share to 26 per cent in the venture.
The bidding for BPCL includes two stages, one participation of qualified bidders in the EOI stage and then financial bids. Any private company having a net worth of over $10 billion will be eligible for bidding, or a consortium of not more than four firms will be allowed to participate. However, state-run companies are not allowed to participate in the process.

Why BPCL's strategic sale does not need a Parliamentary approval

Ahead of a proposed move to fully privatise state-owned fuel retailer Bharat Petroleum Corp Ltd (BPCL), the government had quietly repealed the legislation that had nationalised the company, doing away with the need to seek Parliament nod before selling it off to private and foreign firms.
The Repealing and Amending Act of 2016 had annulled "187 obsolete and redundant laws lying unnecessarily on the Statue-Book" including the Act of 1976 that had nationalised erstwhile Burmah Shell.
"The Act has been repealed and there is no need for a Parliament approval for strategic sale of BPCL," a senior official said.
Keen to get multi-nationals in domestic fuel retailing to boost competition, the government is mulling selling most of its 53.3 per cent stake in BPCL to a strategic partner.
Privatisation of BPCL will not just shake up the fuel retailing sector long dominated by state-owned firms but also help meet at least a third of the government's Rs 1.05 trillion disinvestment target.
BPCL at the close of market on October 4 had a market capitalisation of about Rs 1.11 trillion and a government stake sale could get upwards of Rs 60,000 crore including a control-and-fuel-market-entry premium, officials said.
The Supreme Court had in September 2003 ruled that BPCL, as well as Hindustan Petroleum Corporation Ltd (HPCL), can be privatised only after Parliament amends a law it had previously passed to nationalise the two firms.
The ruling had followed a plan of the then BJP-led NDA government headed by Prime Minister Atal Bihari Vajpayee to privatise the two firms.
The apex court ruling had stalled the plan to sell 34.1 per cent out of government's 51.1 per cent stake in HPCL to a strategic partner along with management control. Reliance Industries Ltd, BP plc of UK, Kuwait Petroleum, Petronas of Malaysia, the Shell-Saudi Aramco combine and Essar Oil had expressed their interest in acquiring that stake before the Supreme Court stalled the process.
But the Supreme Court mandated condition is no longer applicable, they said citing the May 9, 2016, Gazette notification following President's assent to The Repealing and Amending Act, 2016.
Besides others it listed repealing in "the whole" The Esso (Acquisition of Undertakings in India) Act, 1974, The Burmah Shell (Acquisition of Undertakings Act, 1976 and The Caltex [Acquisition of Shares of Caltex Oil The whole] Refining (India) Ltd and of the Undertakings in India of Caltex (India) Ltd] Act, 1977.
According to the Statement of Objects and Reasons for the Repeal Bill introduced in the Lok Sabha on May 13, 2015, the idea was to bring reform in the legal system by removing "incoherent and redundant laws."
"...the present proposal is to repeal 187 obsolete and redundant laws lying unnecessarily on the Statute-Book. On being enacted, it would reduce obsolete laws and bring in clarity to those for whose benefit the laws are enacted," it said.
BPCL offers attractive buy for companies ranging from Saudi Aramco of Saudi Arabia to French energy giant Total SA which are vying to enter the world's fastest-growing fuel retail market. It will not only give them 34 million-ton in refining capacity but also access to about 25 per cent share of India's fuel marketing.
BPCL was previously Burmah Shell, which in 1976 was nationalised by an Act of Parliament. Burmah Shell, set up in the 1920s, was an alliance between Royal Dutch Shell and Burmah Oil Co and Asiatic Petroleum (India).
HPCL was incorporated in 1974 after the takeover and merger of erstwhile Esso Standard and Lube India Ltd through the ESSO (Acquisition of Undertaking in India) Act passed by Parliament. The company was in January last year taken over by state-owned Oil and Natural Gas Corp (ONGC) for Rs 36,915 crore.
The Supreme Court had in September 2003 cited the ESSO (Acquisition of Undertaking in India) Act and the Burmah Shell (Acquisition of Undertaking in India) Act, 1976 and Caltex (Acquisition of Shares of Caltex Oil Refining India Ltd and all the Undertakings in India for Caltex India Ltd) Act, 1977 to rule that the government cannot privatise HPCL and BPCL without approaching Parliament for changing the Nationalisation Act.
"There is no challenge before this Court (Supreme Court) as to the policy of disinvestment. The only question raised before us whether the method adopted by the Government in exercising its executive powers to disinvest HPCL and BPCL without repealing or amending the law is permissible or not. We find that on the language of the Act such a course is not permissible at all," Justice S Rajendra Babu and G P Mathur wrote in the September 16, 2003 order "restraining the Central Government from proceeding with disinvestment resulting in HPCL and BPCL ceasing to be Government companies without appropriately amending the statutes concerned suitably."

BPCL operates four refineries at Mumbai, Kochi in Kerala, Bina in Madhya Pradesh and Numaligarh in Assam with a combined capacity to convert 38.3 million tonnes of crude oil into fuel. It has 15,078 petrol pumps and 6,004 LPG distributors.
India has a total refining capacity of 249.4 million tonnes and 65,554 petrol pumps and 24,026 LPG distributors.