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Saudi Aramco still undecided on BPCL stake purchase
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SME Times News Bureau | 19 Nov, 2019
World's largest oil company Aramco is yet to make up its mind to
participate in disinvestment of Indian fuel refiner and retailer Bharat
Petroleum Corporation Ltd (BPCL) where government intends to sell its
entire 53.29 per cent stake to a strategic investor.
Sources
privy to the development said that Aramco, which kicked off the final
phase of its $25 billion IPO on Sunday, is focused on Indian investment
primarily to conclude the purchase of 20 per cent stake in Reliance
Industries' oil to chemical division and expansion of its upstream
business in high growth markets including India. Entering India with a
large scale investment in a public sector oil refiner and retailer is
not on the horizon as on now, sources said.
When asked
specifically on its plan to acquire majority stake in BPCL whether
solely or in a consortium, Saudi Aramco declined to comment.
Aramco's
lesser focus on BPCL disinvestment may be a cause of worry for the
Indian government that is betting big on the oil giant to takeover its
entire equity in BPCL. In fact, Finance Minister Nirmala Sitharaman has
indicated that BPCL disinvestment may be completed in current fiscal.
While government is expected to launch a roadshow for BPCL disinvestment
in key global markets soon, there is a strong belief that Aramco fits
the bill perfectly with its sheer scale of operations and large size of
the balance sheet.
"For Aramco, its huge IPO is of prime concern
now. It is selling 1.5 per cent stake in the market that could fetch
over $25 billion.Other things, including investments in key markets
would come thereafter. Moreover, with BPCL disinvestment requiring
investor to pump in close to Rs 1lakh crore (about Rs 60,000 crore for
government's stake and balance for open offer), even a company of the
size of Aramco will think twice," said an global oil and gas analyst who
did not wish to be named on the issue.
Aramco in the past has
remained upbeat about the prospect of investment in the Indian market,
which is among the largest oil consumers in the world and where demand
scenario is expected to remain firm next few decades.This mood has also
reflected in the 658 page prospectus filed by the company in the run up
to its IPO where apart from its intention to invest in RIL, it has said
that company is focussing its downstream investments in areas of
high-growth, including India.
Indian government is also looking
at Aramco's investment in $60 billion oil refinery proposed in
Maharashtra as well get its investment in oil marketing and retailing in
the country.
"The bag seems too full for Aramco already and if
at all a decision of BPCL stake purchase is taken, Aramco may join hands
with some other Indian or overseas player to pick government of India's
equity in the company," said the source quoted earlier.
Public
sector Indian Oil Corporation (IOC) has also not ruled out its interest
for BPCL but is waiting for a green signal from the government to
consider placing its interest. However, IOC may not have the financial
muscle to for large stake buy and government does not want to add debt
burden on PSUs. In such a scenario, analysts believe a possible
collaboration between Aramco and IOC may work out. IOC also has started
limited foray in Saudi Arabia by helping set up few fuel stations.
However, government officials denied build up of any such collaboration
at this juncture.
Government's stake is worth over Rs 60,000
crore at prevailing price of BPCL shares on BSE. If the buyer has to
further acquire 25 per cent share in an open offer as per takeover code,
the total amount with rise close to Rs 1 lakh crore. This is considered
too high even by international standards.
On its part, DIPAM is
working out a plan to offload entire government equity to a strategic
partner, possibly a large overseas oil entity like Saudi Aramco, Total,
ExxonMobil, Shell. However, with oil market globally facing a slowdown
with demand not picking up despite supply squeeze, the appetite for a
large acquisition becomes difficult.
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.
The government proposes to raise Rs 1.05 lakh crore
from disinvestment in the current financial year. It had exceeded
asset-sale targets of Rs 1 lakh crore in FY18 and Rs 80,000 crore in
FY19.
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