Meet the new oil barons
Delhi-based consortium to float Badari Vishal Oil to develop recently won Assam-based fields
On the GT Karnal Road, right next to Jahangirpuri Metro station is the SMA Industrial Area. Machines run noisily in factories lined up on both sides of a dusty road. A green gate leads to a factory, where a dozen workers are stuffing scrap into a furnace to make steel blooms. To the left is a two-storeyed office complex.
“We are primarily in steel. We moved here in the late 1980s,” says Piyush Gupta, chairman and managing director of Ramayna Ispat, the leader of the consortium that has won two oil blocks in the Union government’s ‘Discover Small Fields bidding round’.
“We had bid for five blocks and won two. Both the Barsilla field and Dipling cluster, comprising three fields, are in Assam,” 27-year-old Gupta said.
The Ramayna Ispat-led consortium, comprising Duggar Fiber, Mahendra Infratech and BDN Enterprises, trounced established players such as Indian Oil, Cairn India and Essel Group, emerging as winner for the Dipling cluster. A total of 47 companies had bid. Of those, 43 were Indian. The area allotted is expected to have 40 million tonnes (mt) of gas and 22 billion cubic metres (bcm) of oil. About 31 such blocks awarded in this round are expected to bring a gross revenue of ~46,000 crore, of which the government’s share is likely to be ~9,600 crore.
The Delhi-based group is in the process of floating an entity called Badari Vishal Oil Company, which will develop the fields, and is keen to build a name in the sector.
“WE ARE PLANNING TO START ON-FIELD OPERATIONS BY OCTOBER AND BEGIN COMMERCIAL PRODUCTION BY FEBRUARY NEXT YEAR” PIYUSH GUPTA
“We are looking to work, not to pass on. There will be organisation building. We are discussing recruitments with agencies. We are not interested in selling equity,” Gupta said. The family is also averse to leverage, a quality that has helped them stay out of the widespread trouble in the steel sector. Gupta said the role of the banks would be limited to providing the $5million bank guarantee required under the regulations. “We are not looking at debt but fund it from our investments. Over three years, total investments would be around ~170 crore. Of that, spending from our end would be ~70-80 crore,” he said, adding, the rest would come from revenue generated from the fields.
A petroleum ministry official said, “Newcomers should have sufficient money and that was the only criteria that we looked at, not any technical expertise.” The group is in discussion with top consultants, including Schlumberger and HalliBurton, for field development. “We are new, so we need to have the best of knowledge available.”
“The field development plan will take four-five months. We are planning to start on-field operations by October and begin commercial production by February next year,” Gupta added.
As the fields are discovered ones, the group expects risks to be substantially low. “If the assessment was 100, it may go down to 75. It would not be zero.” Originally from Sri Ganganagar in Rajasthan, the family moved to Delhi in the late 70s. “Steel, education, infrastructure and garment exports are the businesses covered by our consortium members,” says Gupta.
Ramayna, the consortium leader, is in steel manufacturing. With a factory in Bhiwadi, Rajasthan, Ramayna has an annual turnover of about ~250 crore. Duggar Fiber, to which the Jahangirpuri factory belongs, is in stainless steel manufacturing. The equity capital of these two companies is owned by Gupta, his father Purshottam Kumar Gupta and companies such as Ambica Devcon, BB Steels and Heritage Metallics. Mahendra Infratech, which is in housing projects in Meerut and surrounding areas, is owned by Mahendra Gupta, while BDN Enterprises is in garment exports and is owned by Avnish and Punita Jindal, based in Faridabad.
“We are very much related. We planned to form a consortium to derisk and try our luck,” recalled Gupta.
The younger members of the family took an interest in the bidding programme after attending a roadshow at the Hotel Ashok, New Delhi, in July. “There was a second roadshow in Mumbai. We participated in that, too.” Gupta said they wanted to be sure what they were getting into. The meeting with Petroleum Minister Dharmendra Pradhan and Directorate General of Hydrocarbons (DGH) officials at the roadshow boosted their confidence, he added.
The ministry was on a handholding mode in the bidding process — conducting roadshows, arranging meets for consortium partners and contractors and even conducting a mock-bidding process. “We will be with them on the road ahead also. Within a month, contracts will be signed,” the ministry official added.
Not everyone could capitalise on the help available. Of the 46 contract areas on offer, 34 got about 134 e-bids. Of this, only 31 were awarded. Sources say the remaining three that were not awarded were those in which Akhil Teja Natural Resources was the sole bidder. The Bengalurubased start-up came into the limelight when it put the maximum number of bids for 17 blocks. However, it deposited bond amount for only one block and requested DGH to put that money in whichever block it won. This led to the disqualification, according to the officials.