Government appoints Deloitte as advisor for BPCL stake sale

Industry:    November, 2019

The Department of Investment and Public Asset Management has appointed Deloitte Touche Tohmatsu Ltd as advisor for the strategic sale of Bharat Petroleum Corporation, a senior banker associated with the process said.

Completion of the stake sale in India’s second-largest state-owned oil refiner by March 2020 could help the government mobilise more than Rs 60,000 crore, or $8.4 billion, and narrow the fiscal deficit. At the closing price of Rs 509.95 on the BSE on Thursday, BPCL’s market cap was Rs 1,10,621 crore, valuing the government’s 53.29% stake at a tad below Rs 59,000 crore.

The government approved the strategic disinvestment in BPCL last week, along with transfer of management control, but excluding the stake in Numaligarh Refinery, which will be carved out of BPCL before privatisation. “The transaction is expected to be at a significant premium to the underlying price as the buyer will have to pay the control premium. Besides the fact that the replaceable value of the BPCL’s asset is much more than the current market price, the successful acquirer will also have to give control premium,” the banker said.

The government has set a divestment target of Rs 1,05,000 crore for 2019-20. Some global petrochemical giants have expressed interest in the assets of BPCL and are expected to bid, people aware of the matter said. Unlike the sale of Hindustan Petroleum Corporation Ltd. to Oil and Natural Gas Corp. in 2017-18, the acquirer of BPCL will have to offer to buy an additional 25% of the company’s shares from the market.