The business acquiring BPCL is unlikely to receive an exemption from the mandated open offers for Petronet LNG Ltd and Indraprastha Gas from India’s capital market regulator.
According to officials, other promoters of the two firms, like GAIL, will buy shares to prevent the companies from going private.
The largest liquefied natural gas importer in India, Petronet, is owned by Bharat Petroleum Corporation Ltd. (BPCL), which also owns a 12.5% stake in city gas reseller IGL. . It serves on boards and promotes the mentioned entities.
The Department of Investment and Public Asset Management (DIPAM), which is in charge of the sale of the government’s entire 52.98 percent stake in BPCL , has determined that the buyer of BPCL will have to make open offers to the minority shareholders of Petronet and IGL in order to acquire their 26% of the company.
A request for an exception was made to the Securities and Exchange Board of India in order to prevent such a situation (SEBI).
The objective of the SEBI is to defend the interests of minority shareholders, so it is doubtful that the exemption request will be granted, according to a top government official who did not want to be identified because the information was not made public.
If the open offers are successful, the buyer of BPCL would also gain control of IGL and become the largest stakeholder in Petronet (12.5% of BPCL 26% from the public) (22.5 per cent of BPCL and 26 per cent from public).
The official explained, “In essence, the two will likewise be divested alongside BPCL.
To prevent this from happening, the other Petronet and IGL promoters would also make counter proposals to purchase an identical 26% holding in order to guarantee public sector enterprises would continue to hold a controlling interest. PTI was the first to report on the attempt by Petronet and IGL’s backers to save the company on July 21.
We are aware that other promoters may launch share purchase offers without restriction, and they will, the executive stated.
Along with BPCL, the government-owned gas utility GAIL is a co-promoter of IGL. Along with BPCL, GAIL, refiners Indian Oil Corp (IOC), and Oil and Natural Gas Corp (ONGC), each owning a 12.5% share in Petronet, are joint promoters.
Both Petronet and IGL’s remaining shares are held by institutional and public investors.
DIPAM had originally asked SEBI for a permission of exemption for an open offer in Petronet and IGL on April 19.
However, the official stated that SEBI had informed BPCL that as the promoter of IGL and Petronet, the application was to be submitted in the format specified. BPCL subsequently submitted such an application.
The other option was for BPCL to sell a portion of its Petronet and IGL holdings, giving up its promoter position in the process, to prevent the new owner from being required to make an open offer.
However, BPCL is against the concept since it would destroy value.
At the present share price, the government’s 52.98 percent ownership in BPCL is worth around Rs 51,800 crore. At current prices, it will cost an additional Rs 25,400 crore to make an open offer for an additional 26% to the company’s minority shareholders.
The purchaser would also have to pay an extra Rs 9,464 crore for an open offer to buy a 26% interest in IGL, and a further Rs 9,000 crore for an open offer to buy a similar holding in Petronet.
The mining-to-oil behemoth Vedanta is competing with the private equity companies Apollo Global and Think Gas, an affiliate of I Squared Capital, to acquire the government’s interest in BPCL.
For the fiscal 2021–2022 period’s disinvestment proceeds to reach a record of Rs. 1.75 lakh crore, the share sale in India’s second-largest fuel retailer is essential (April 2021 to March 2022).
About 15.33 percent of India’s oil refining capacity and 22% of the fuel marketing share will be owned by the buyer thanks to BPCL.
(Only the report’s headline and image may have been changed by the Business Standard team; all other material was likely created automatically from a syndicated feed.)
