Vedanta Submits EoI with an Eye on Government's Entire Stake in BPCL

The Anil Agarwal-led mining major, Vedanta Group has announced that it has submitted an expression of interest (EoI) for buying 52.98 percent government stake in Bharat Petroleum Corporation (BPCL). One of the spokesperson from Vedanta stated “Vedanta’s EoI for BPCL is to evaluate potential synergies with our existing oil and gas business. The EoI is at a preliminary stage and is exploratory in nature”. A least of three to four players have reportedly submitted EoIs for the privatization process of BPCL. The deadline for submission was Monday, but the government has not officially revealed any names.

Vedanta has been venturing into new business segments ever since it bought Cairn India in December 2011. It also branched out into gold mining. It also acquired the control of Electrosteel Steels under a resolution plan, thereby foraying into the steel sector in 2018. However, industry experts indicate that with the recent failure of the delisting process and the company sitting on a debt-pile of reportedly over Rs. 1.25 trillion, the acquisition of BPCL may not be easy for the metals-to-mining conglomerate.

According to rating agency S&P Global, the failed delisting has narrowed the refinancing options for its parent company Vedanta Resources, raising risks over the company’s ability to sustainably service its debt beyond the next 12 months. Vedanta’s scrip was up 1.4 percent on Wednesday at Rs. 108.85. The bidding for BPCL includes two stages: one, participation of qualified bidders in the EoI stage; and two, financial bids. Any private company with 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.

The sale of BPCL is crucial to meet the divestment target

According to rating agency S&P Global, the failed delisting has narrowed the refinancing options for its parent company Vedanta Resources, raising risks over the company’s ability to sustainably service its debt beyond the next 12 months

of Rs. 2.1 trillion for the current financial year. According to reports, other than Vedanta, some private equity funds and/or pension funds have also placed EoIs. A day after the EoI deadline, the BPCL stock closed at Rs. 394.45 on Tuesday. The news of Vedanta placing an EoI, however, did not enthuse investors, with the stock price falling 2.85 percent on Wednesday to Rs. 383.2.

According to multiple sources, major players like Reliance Industries, Saudi Aramco, Rosneft, and ExxonMobil had shied away from the bidding process. It was in November last year that the Union Cabinet had cleared the sale of the government’s entire stake in BPCL. Following this, EoIs were invited from investors on March 7. Based on the current market capitalization of Rs. 83,125.8 crore, the value of government share’s in BPCL comes to around Rs. 44,040 crore. For investors, around 35.3 million tonnes of refining capacity, 16,492 retail outlets, and 72 million LPG customers will be on offer.

The government’s plan is to sell its entire shareholding in BPCL comprising 1.15 billion equity shares, with the transfer of management control to a strategic buyer, excluding the company’s 61.65 per cent in the Numaligarh Refinery in Assam. Vedanta’s interest in Bharat Petroleum Corp. stems from its $8.67 billion acquisition of oil producer Cairn India nearly a decade back. The company produces oil from oilfields in Rajasthan which are used in refineries such as those operated by Bharat Petroleum Corp. to turn them into petrol, diesel and other fuels. “Strategic disinvestment of BPCL progresses: Now moves to the second stage after multiple expressions of interest have been received,” Union finance minister Nirmala Sitharaman had also tweeted on Monday.