‘Competitive price discovery needed in a deal like BPCL’

Only one bidder vying for BPCL would not have helped in better price discovery, Department of Investment and Public Asset Management (DIPAM) Secretary TUHIN KANTA PANDEY told Business Standard, while pointing out that the government would wait to assess the situation before proceeding further. In a conversation on wide-ranging issues, Pandey also said LIC investors should be patient and look at the insurer’s long-term prospects. Edited excerpts:

“WE HAVE ALWAYS MAINTAINED THAT LIC WILL GENERATE VALUE IN THE MEDIUM TO LONG TERM. INVESTORS SHOULD BE PATIENT”

How would the new BPCL privatisation process be different?

Several uncertainties including the Covid-19 pandemic impacted the transaction. Energy transition, geopolitical tensions and several jurisdictions having decarbonising targets made it difficult for investors to invest in refining. There’s some uncertainty on consortium formation due to the size of the deal too. With the investors withdrawing bids, the government will wait for a while to assess the situation and decide how to proceed further. This would also involve restructuring the transaction after a comprehensive review. There is no presently available solution. The

Secretary, oil and gas sector has gone through a

DIPAM turmoil globally in the last two years and the initial interest did not sustain till the conclusion of the transaction.

What will be the learning from the current privatisation process?

PSU privatisation is being done transparently-- when a transaction is not going through a competitive bidding process, we are calling off the deal. A single-bid solution is also possible after openly advertising, but it will not help in better price discovery. This was the advice from ministers’ panel as well that in a deal like BPCL, competitive price discovery is needed. Market price can be determined but since the government will be ceding control in BPCL, the price will have to include a control premium which will have to be discovered with at least two parties

vying for the asset.