The Telegraph
Since 1st March, 1999
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BPCL selloff ball rolls
- Panel sends sale blueprint for Cabinet approval

New Delhi, June 27: The committee of secretaries (CoS) on disinvestment has approved a draft Cabinet note that will clear the decks for selloff in Bharat Petroleum Corporation (BPCL), Hindustan Organic Chemicals (HOCL) and National Fertilisers Limited (NFL).

The Cabinet Committee on Disinvestment (CCD), which is slated to meet next week, will accept the note, sources said. The three are part of a list of 24 companies short-listed by the disinvestment ministry for sale this year. While Bharat Petroleum will be sold through an IPO, the other two will go to strategic buyers.

The panel of secretaries has appointed DSP Merrill Lynch as an adviser to the planned public issue in BPCL. UBS Warburg and I-Sec, a division of ICICI Bank, are likely to be picked as co-lead managers for the offer.

The Centre will offload 35.2 per cent in BPCL through a combination of a maiden offer to Indian investors and an overseas flotation — an American or global depository receipt. Another 5 per cent will go to employees.

Once the phased sale of equity in the market is completed, the government will be left with only 26 per cent in the company, but will still have management control.

Reports of progress in its selloff have set the BPCL share alight over the last few weeks. Investors happy with signs that the government was appointing a global adviser for divestment of its stake in the oil refining company amassed the stock in the hope of future gains.

Another positive for the share has been the decline in crude prices, which have fallen from $ 38 a barrel before the Gulf War to just over $ 26 a barrel at present. Domestic refiners, which import 70 per cent of their crude requirements, see their fortunes fluctuate with gyrations in the global crude market. A flare-up burns away their margins and blows a hole in their profitability.

In the case of National Fertiliser, the government intends to divest 51 per cent — of the 97.65 per cent that it holds — to a strategic partner. Kribhco, Iffco and Tata Chemicals are leading the race for the state-run firm. Rabo Finance is the global adviser to the sale.

Fertiliser co-operatives were allowed to bid for NFL last year under a special arrangement after the Akali Dal, a partner in the ruling BJP-led coalition, railed against the sale to private firms. It wanted co-operatives (in which the Centre has stakes) to be let into the fray.

In the case of Hind Organic Chemicals, bidders have already conducted a due-diligence and final bids will be invited after a Cabinet nod. RCF is among those interested. The government’s holding in the PSU will come down to 26 per cent once the strategic sale is completed.

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