Cash chase

New Delhi, April 8: The 9-million-tonne Bhatinda refinery is planning to raise around Rs 1,500 crore through an initial public offer.

The Rs 21,500-crore refinery of HPCL-Mittal Energy (HMEL) — a joint venture between state-run Hindustan Petroleum Corporation Ltd (HPCL) and Singapore-based Mittal Energy Investment — was commissioned recently.

Company sources said, “We can take a relook at tapping the capital market now that we have commissioned the refinery.”

There is a general interest for the firm in the market, sources said.

HMEL had planned the IPO in 2010 but had postponed it till the commissioning of the refinery.

HPCL and Mittal Energy Investments both hold a 49 per cent stake. The remaining 2 per cent are with the financial institutions. The two firms plan to dilute 5 per cent of their stakes each and offer 10 per cent to the public.

The company intends to use part of the proceeds to lay a pipeline from Bhatinda to Lahore in Punjab to export petroleum products to Pakistan. It also plans to double capacity to 18 million tonnes per annum in phases.

The commissioning of the Bhatinda refinery — the 22nd in India — has raised the country’s refining capacity to around 202 million tonnes, enabling the country to explore export opportunities.

Oil minister S. Jaipal Reddy had said in January that the country was examining a proposal to export petroleum products to Pakistan.

India has offered to export petrol, diesel and other oil products to Pakistan and has initiated talks of building a pipeline from the Mathura, Panipat and Bhatinda refineries.

According to analysts, energy trade with Islamabad will be a big opportunity for HMEL as it is “best positioned to use the refinery as a critical gateway to supply products required by the South Asian neighbour. Supplying through pipeline would be an apt business model where revenue will more than offset relatively low investment in the pipeline”.

Pakistan’s refining capacity meets only half of its total requirement, while India exports almost one-fourth of its 185-million-tonne annual capacity.

Though Pakistan has allowed the import of diesel from India, a ban is still in place on petrol and other petroleum products. It plans to initiate steps to open its market to petroleum products following the grant of most favoured nation status.

The refinery will produce high value petroleum products such as LPG, naphtha, petrol, diesel, aviation fuel and pet coke. The liquid products will be marketed through HPCL. Solid products such as sulphur, pet coke and polypropylene will be sold directly by HMEL.

Imported crude oil to the refinery is ferried through a 1,014-km pipeline from Mundra port in Gujarat.