Govt to reconsider valuation of Bharat Petroleum
NEW DELHI: The enterprise value of Bharat Petroleum Corp. Ltd (BPCL) is estimated at around ₹800 per share, almost double its prevailing market value, which has caused concerns within the government as a section feels that the controlling stake in the oil company cannot be sold only on the basis of its stock price, two officials with direct knowledge of the matter said.
One way of selling a company is at its market value, when its share price is higher than the enterprise value—for example a knowledge-based entity that has insignificant physical assets.
But a company like BPCL, which has significant physical assets, cannot be sold merely on the basis of its share price, the officials said, requesting anonymity. Enterprise value is a comprehensive measure of a company’s total valuation, beyond its equity market capitalisation.
One of the officials, who is directly involved in the BPCL sale process, said the company’s share price was only one factor; the government has to factor in its assets such as refineries, pipelines, petrol pumps, brand value and real estate.
“Two things are quite important in BPCL’S disinvestment – valuation of peer companies and a premium of 20-30%,” the official said.
“After factoring in all these
factors, government’s controlling stake in BPCL should fetch between ₹1 lakh crore and ₹2 lakh crore (including a premium),” he said.
The second official mentioned above said BPCL was a national asset and any major fluctuation in its share price or enterprise value after disinvestment could raise questions and could invite scrutiny by agencies such as Comptroller and Auditor General of India (CAG). The central government controls BPCL with a 52.98% stake.
“Employees association (of public sector oil companies) have already raised this issue with the government. According to them, the valuation of the company (BPCL) should be some where around ₹9 lakh crore. Although the valuation appears very high, their opinion cannot be ignored completely. As per the current market valuation, the government would get a maximum of about ₹45,000 crore to ₹50,000 crore, which is a hugely discounted price,” the first official added.
Consulting firm Deloitte Touche Tohmatsu India Llp is the transaction adviser to the department of investment and public asset management (Dipam), an arm of the finance ministry, managing BPCL’S disinvestment process. The petroleum ministry is the administrative ministry of BPCL.
Deloittte, Dipam and the ministries of finance and petroleum did not respond to queries on the matter.
Mukul Kumar, convener of the Federation of Oil PSU Officers (FOPO) confirmed having raised the issue with the government.
“Yes, we wrote to the government about BPCL’S actual valuation, which is estimated around ₹9 lakh crore as per an internal calculation,” he said.