The Telegraph
Since 1st March, 1999
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Hind Petro selloff takes off

New Delhi, Feb. 7: The government today kick-started its disinvestment process in the oil sector by inviting initial bids for sale of 34 per cent stake in Hindustan Petroleum Corporation Ltd.

The prospective bidders have been asked to submit their bids by March 17.

While picking the strategic partner, the government will pay attention to the security requirement of the country — a key argument that had been raised by opponents of the proposal to privatise Hindustan Petroleum.

The invitation for expressions of interest for Hindustan Petroleum came a day after the Delhi High Court dismissed as withdrawn a petition challenging the decision to disinvest in the two oil PSUs — Hindustan Petroleum and Bharat Petroleum Corporation Ltd.

The government had decided on January 26 to divest 34.01 per cent equity in Hindustan Petroleum by taking a strategic partner on board. It also decided to divest 35.02 per cent in Bharat Petroleum through a public offer. The disinvestment ministry will soon seek a meeting of the inter-ministerial group on Bharat Petroleum to work out details on the public offer.

Under the pre-eligibility criteria, the bidders who can bid either singly or as a consortium must have a net worth of at least Rs 2,500 crore to submit the expressions of interests for Hindustan Petroleum.

Further, in case of a consortium, net worth of only those partners would be taken into account who intend to have a 10 per cent stake in the joint bid.

Besides Indian companies, overseas corporate bodies and foreign companies are eligible to bid for the profit-making oil PSU that has more than 20 per cent of the domestic market for petro-products.

The Cabinet barred other PSUs, including Oil and Natural Gas Corporation from bidding for the company.

The bidding for Hindustan Petroleum is expected to pit Reliance, Shell, ChevronTexaco and Essar.

The successful bidder would also have to make an open offer for the floating stock in the company, where the government holding would come down from 51 per cent to 12 per cent after sale of equity to strategic partner and a concessional offer of another 5 per cent of the equity to employees.

The unions in Hindustan Petroleum have already threatened to launch a strike to protest against the selloff. They have also indicated they will not allow prospective bidders to carry out an on-site due diligence exercise.

This is a serious threat. A team from the AV Birla Group was beaten up last year when they tried to visit the Nalco plant in Orissa, stalling the process of privatisation at the state-owned aluminium maker.

The parcel of 34 per cent equity in Hindustan Petroleum will comprise over 11.5 crore shares that would be valued at about Rs 3,500 crore, based on the current market price of around Rs 300 a share.

However, the control premium and strategic value of the company, with reserves and surplus of Rs 5,558 crore by 2001-02, could mean a substantial increase for interested parties in the wake of Hindustan Petroleum’s retail chain that could offer an entry into the lucrative petro-products market.

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