BPCL could cost acquirer Rs 20K cr more as SEBI open offer exemption for IGL, PLL unlikely
The privatisation plan of public sector oil refiner Bharat Petroleum Corporation Ltd may get expensive for the investors as the new owners are unlikely to get regulatory exemption to participate in open offer of two other entities – Petronet LNG Ltd (PLL) and Indraprastha Gas Ltd (IGL).
Sources privy to the development said that market regulator Securities and Exchange Board of India (SEBI) is not in favour of giving exemption to the BPCL from making open offer in the PLL and the IGL where it already holds substantial stake as it would go against the interest of minority shareholders.
The BPCL holds 12.5 per cent of the shareholding in India’s largest liquefied natural gas importer, Petronet, and a 22.5 per cent stake in city gas retailer, IGL. The strategic buy of the BPCL would also change the ownership structure of these two entities, triggering the takeover code and need to launch and open offer for purchase of additional 26 per cent equity each in the two entities.
Sources said that this would add up another Rs 20,000 crore to the acquisition cost of the BPCL where the strategic buyer would pick up governments 52.98 stake at about Rs 50,000 crore and spend another Rs 25,000 crore for making open offer for additional 26 per cent of the BPCL stake in the two.
“The entire process with open offers could make the total BPCL acquisition too expensive. Government should look at offering some solution for this issue,” said an oil sector analyst tracking the privatisation process for BPCL.
Sources said that government is examining yet another proposal to see whether other PSU oil promoters of the PLL and the IGL could be allowed to participate in the mandatory open offer to shareholders of these entities triggered post privatisation of the BPCL.
Along with the BPCL, other oil PSUs Indian Oil Corporation (IOC), Oil and Natural Gas Corporation (ONGC), and GAIL India are joint promoters of the PLL and the IGL. These entities would reduce their shareholding in these companies if only the BPCL goes ahead with the open offer post privatisation. This would change the PSU status of the IGL and the PLL, which the government does not intend to pursue at this juncture.
As part of the solution, it is being explored whether the IOC, the GAIL, and the ONGC can participate along with the BPCL in the open offer triggered post sale of the government’s 52.98 per cent equity in the BPCL. If the SEBI gives approval for such open offer, each of the existing promoters could retain their shareholding in the PLL and IGL or increase it.
Also, such an exercise would reduce monetary burden on the new owner of the BPCL while preventing erosion in its valuation that can happen if the PLL and the IGL are separated from it before its sale.
