BPCL to raise $500 mn from over­seas bond sale

Mint ST - - MARKETS AND FINANCE - Kal­pana Pathak kal­[email protected] MUM­BAI

The fundraise will help the firm meet the capex re­quire­ments for its ex­pan­sion plans

State-run Bharat Pe­tro­leum Corp. Ltd (BPCL) has hit the in­ter­na­tional bond mar­ket to raise as much as $500 mil­lion, said two in­vest­ment bankers, re­quest­ing anonymity.

BPCL, In­dia’s sec­ond largest re­finer and fuel re­tailer, will raise cap­i­tal through the sale of for­eign cur­rency con­vert­ible bonds (FCCBS) to meet its cap­i­tal ex­pen­di­ture, they added.

“BPCL is ex­pand­ing its re­fin­ing and petro­chem­i­cals op­er­a­tions. The fundraise will help the com­pany meet the capex re­quire­ments for its ex­pan­sion plans,” said the first in­vest­ment banker. The bonds have been is­sued Baa2 rat­ing by Moody’s. The ten­ure of the is­sue could, how­ever, not be as­cer­tained im­me­di­ately. “The af­fir­ma­tion of BPCL’S rat­ings re­flects our ex­pec­ta­tion that its credit pro­file will re­main con­strained by high share­holder re­turns de­spite its im­prov­ing op­er­at­ing pro­file,” said Vikas Halan, se­nior vice pres­i­dent, Moody’s, adding that the com­pany may mod­er­ate its div­i­dend pay­ments or ad­just its cap­i­tal spend­ing over the next 12-18 months to im­prove its credit met­rics.

Moody’s also ex­pects BPCL to pay an in­terim div­i­dend of ₹14 per share next month. The quan­tum of div­i­dend is ex­pected to be higher in the ab­sence of a share buy-back.

“Al­though BPCL, un­like some of the other state-owned oil and gas com­pa­nies in In­dia, has not yet an­nounced a share buy­back, Moody’s ex­pects the com­pany will need to pay an in­terim div­i­dend in

Fe­bru­ary 2019 of at least ₹14 per share, equal to the in­terim div­i­dend paid in Fe­bru­ary 2018,” the agency said.

On 13 De­cem­ber, In­dian Oil Corp. Ltd (IOCL) had an­nounced a buy­back of over 297.6 mil­lion shares, be­sides of­fer­ing an in­terim div­i­dend of ₹6.75 per eq­uity share. The same month also saw Oil and Nat­u­ral Gas Corp. (ONGC) an­nounc­ing a buy­back for 1.97% of its eq­uity shares.

Moody’s added that in the ab­sence of a share buy­back and given an in­crease in BPCL’S re­ported net profit, the in­terim div­i­dend payable could be even higher than Moody’s cur­rent es­ti­mates. The agency ex­pects that any such a move may fur­ther weaken the com­pany’s credit met­rics. Last Au­gust, BPCL had paid div­i­dend of ₹7 per share for 2017-18.

The rat­ing agency ex­pects BPCL’S debt/earn­ings be­fore in­ter- Moody’s ex­pects BPCL to pay an in­terim div­i­dend of ₹14 per share next month. The quan­tum of div­i­dend is ex­pected to be higher in the ab­sence of a share buy-back.

est tax de­pre­ci­a­tion and amor­ti­za­tion (Ebitda) to re­main at el­e­vated lev­els of 2.7-2.8 times in the fis­cal year end­ing March 2019, com­pared to 2.8 times in 2017-18.

BPCL’S op­er­at­ing pro­file has im­proved since the com­ple­tion of its Kochi re­fin­ery in 2018. Its to­tal re­fin­ing through­put in­creased to 37.7 mil­lion tonnes in fis­cal 2018 from 34.4 mil­lion tonnes in the pre­vi­ous fi­nan­cial year. It has also up­graded its re­fin­ery to use a higher pro­por­tion of heavy crude oil, po­si­tion­ing it well to ben­e­fit from the in­creas­ing dif­fer­en­tial be­tween light and heavy crude oil.

RAMESH PATHANIA/MINT

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