BPCL looks to shed promoter status, may sell stake in IGL

NEW DELHI: Privatisation-bound Bharat Petroleum Corporation (BPCL) may sell a part of its stake in Petronet LNG and Indraprastha Gas (IGL) to shed its promoter status to obviate the need for its new owner to make open offers for the two gas companies, sources said.

BPCL holds 12.5% of shareholding in India’s largest liquefied natural gas importer, Petronet, and a 22.5% stake in city gas retailer, IGL. It is a promoter of both the listed companies and holds board positions.

As per the legal position evaluated by Department of Investment and Public Asset Management (DIPAM), the acquirer of BPCL will have to make an open offer to the minority shareholders of Petronet and IGL for acquisition of 26% shares, three sources with knowledge of the matter said.

This is because BPCL is a promoter of the two companies and since there is a change in ownership of the promoter firm, an open offer is triggered under Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. A way out could be for BPCL to sell a part of its shareholding in the two firms and shed promoter status, thereby obviating the need for open offers, sources said.

BPCL, however, is not in favour of selling the stake, and giving up promoter status will result in substantial value erosion for the firm.

But the thinking in the government is that the open offers for Petronet and IGL may deter bidders who are mostly eyeing BPCL’s oil refining assets and 22% share of the fuel marketing business it commands, sources said.

BPCL spokesperson refused comments for the story.

The government’s 52.98% stake in BPCL is valued at about ₹54,000 crore at the current share trading price. The requirement for making an open offer for additional 26 per cent to minority shareholders of the company will cost an additional ₹26,700 crore.

On top of it, an open offer for 26% stake in IGL would cost the acquirer an additional ₹9,400 crore and a similar offer for Petronet would cost over ₹9,300 crore.

Bidders, sources said, may not find BPCL holding stake in Petronet and IGL a value proposition as such a stake does not give them any special rights such as getting preference in importing of LNG at terminals of Petronet or a say in gas retailing by IGL