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BPCL may buyout Oman Oil stake in Bina refinery before its sale
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SME Times News Bureau | 15 Sep, 2020
Sale-bound Bharat Petroleum
Corporation Ltd (BPCL) may buy out the entire stake of OQ, the erstwhile
Oman Oil Company (OOC), in their Madhya Pradesh joint venture, the
Bharat Oman Refineries Ltd (BORL).
Government sources said that
BORL became a subsidiary of BPCL in March this year and the next step
now is to convert it into a 100 per cent subsidiary before government
stake in the company is sold to a strategic partner.
For this to
happen, it is essential that BPCL buys out OQ's stake in the refinery
before its own sale process goes off the ground. This is important as
BPCL's valuation may be impacted if a joint venture remains in its fold
even after new owners take control.
BPCL and OQ were 50:26 joint
venture partners in BORL till March when BPCL converted 13 per cent of
its earlier investment made in compulsorily convertible debentures and
share warrants of BORL or Bina refinery. This made BORL a subsidiary of
BPCL as its stake in the refinery increased to 63 per cent from 50 per
cent earlier.
The investment in convertible debenture was
equivalent to 24 per cent additional equity stake in BORL. Sources said,
if BPCL converts the remaining 11 per cent of convertible debentures to
equity, its holding in BORL will increase to 74 per cent given that OQ
has not shown interest in increasing stake in BORL by putting in
additional equity. This will leave 26 per cent equity with OQ that the
company will negotiate to buy to complete 100 per cent acquisition of
Bina Refinery.
OQ could not be reached for comments.
The
refinery has expanded its capacity from 6 million tonne (mt) per annum
to 15 million tonne in two phases. While OOC had agreed to provide funds
in the first phase of expansion to 7.8 mt with an investment of Rs
3,500 crore, it was unwilling to participate in the second phase that
needed another Rs 30,000 crore over next five to six years.
BORL
was formed as an equal joint venture company way back in 1993. However,
following inordinate delays in the implementation of the project, OOC
froze its investment in the company at Rs 75 crore for a two per cent
equity stake. In 2009, OOC paid a 50 per cent premium for a re-entry
into the Rs 11,397-crore Bina refinery project, picking up 26 per cent
stake.
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