GOVT APPROVES TO SELL STAKE IN BPCL AND FOUROTHER PSUs
The cabinet committee on economic affairs cleared theprivatization of Bharat Petroleum Corp. Ltd and Shipping Corp. of India. It isone of the government's largest asset-sale exercises involving five companies.Other companies in which the government will sell stakes are Container Corp, ofIndia Ltd, THDC India Ltd, and North Eastern Electric Power Corp, Ltd.
The government will sell its 74.23% and 100% stake in THDC andNeepco respectively also with management control to state-run India's largestpower generation company- NTPC Ltd as part of a consolidation exercise of thestate-run hydropower firms.
Earlier, the government has set a tall divestment target of 1.05trillion for the fiscal year 2020. It would need to sell stakes in some of thelarge public sector companies to reach the goal. Here, BPCL seems to be on theradar.
According to a report of Business Standard, the union government wasplanning to sell its entire stake worth more than 40.000 crores in BharatPetroleum Corp. Ltd. In the same way, the stake sale would most likely be toanother government-owned entity, Indian Oil Corp. Ltd.
One of the biggest and most significant questions rose whether theprivatization of BPCl would bring positive results for investors. Analysts fromICIC Securities Ltd said, "The privatization of BPCL would realize a higherprice, may be helpful to take politics out of the auto fuel pricing. It wouldalso assure IOC's ability to pay a hefty dividend to the government is notimpaired and may enhance the market sentiment as it would be seen as big bangreforms."
Earlier, the government had sold its stake in Hindustan PetroleumCorp. Ltd to Oil and Natural Gas Corp. Ltd at an 18% premium to prevailingprices. Analysts at Prabhudas Lilladher think the premium can be much higher inthe case of privatization.
Furthermore, a merger with IOC will bring a large behemoth in theenergy sector. BPCL's stake sale to IOC will raise the latter's market sharedominance in transportation fuels that may reduce proposed private sectorinvestments in these fields according to ICICI Securities.
In the recent past, investors have noticed the improvement in therefining industry. The shares of BPCL and HBCL have increased 23% and 16%,respectively, because of the enhancement in gross refining margins.
Presently, the Indian energy space has been witnessing raisinginterest from investors. While Adani Gas Ltd and Total SA are on the way tomake a gas fuel retail network of 1,500 outlets along highways, Saudi ArabianOil Co. (Saudi Aramco), the world's largest oil producer is also planning tomake its mark in the fuel retailing market in India. That apart, global energymajors like Rosneft, Kuwait Petroleum, ExxonMobil, Shell, and Abu DhabiNational Oil Co. are considering acquiring the government's stake in BPCL.
Also, the government has given the decision to merge BharatSanchar Nigam Ltd and Mahanagar Telecom Nigam Ltd, its twin state-run telecomcompanies, to turn around themoney-losing firms.
The Cabinet has given approval to the food ministry's decision toimport 120,000 tonnes of onions to improve the key kitchen staple's domesticavailability.