Vedanta is willing to spend as much as $12 bn to acquire BPCL

Industry:    4 months ago

Vedanta Group is willing to spend $12 billion to acquire India’s state-owned refiner Bharat Petroleum Corp., an asset sale that’s among the nation’s biggest and which has faced delays in completion.

“We’re not going to bid aggressively, but we will put the right price,” billionaire chairman Anil Agarwal said in an interview in Riyadh on Wednesday. “The market cap of the company is about $11 billion to $12 billion, so this is the amount of investment we’re looking at.”

India’s plan to privatize BPCL has run into rough weather with bidders struggling to find partners and spread their financial risks for the big-ticket acquisition. The country was expecting global oil majors to team up with investment funds to participate in the sale. But some bidders are finding it difficult to invest due to global sustainability rules that make it tougher for them to make large investments in fossil fuels.

The sale, potentially the country’s biggest privatization, is crucial for the government because it needs to raise revenues for its spending programs. It’s already missed a September deadline to complete the sale of its entire 53% stake in BPCL, the country’s second-biggest state refiner. The company’s current market capitalization is around 848.27 billion rupees ($11.4 billion).

The commodities tycoon expects India to open the bids for BPCL in March. Besides Vedanta Group, private equity firms Apollo Global Management and I Squared Capital have also showed interest in acquiring the government’s holding in the oil refiner.

“We’ve an understanding with people, everyone will be putting the money as the deal comes through,” Agarwal said, adding his company has teamed up with London-based Centricus Asset Management Ltd. to create a $10 billion war chest to buy assets that the Indian government wants to exit, including a stake in Shipping Corp. of India.

Here are some more comments from Agarwal on his various businesses:

  • Agarwal said he was confident Vedanta would soon regain control of its copper unit in Zambia.
    • “The new government said publicly that we have legal rights. The court has made a ruling. So I have a feeling that it’s a question of time to get back our assets.”
    • “We have invested almost $3 billion in Zambia and we need to invest a further $2.5 billion to make it world class.”
    • NOTE: Vedanta Resources’ Zambia copper unit has been under provisional liquidation since May 2019 and the matter is still the subject of court cases and arbitration proceedings.
  • Vedanta sees good potential for investing in zinc mining projects in Saudi Arabia.
  • On the ESG front, Agarwal said he is looking to invest $20 billion on transforming operations to produce metals in a sustainable way, without adding any details.