Fitch Ratings on Friday stated there is more visibility on BPCL privatisation, but there is nevertheless small details on prospective restrictions for the new owner in relation to employee protection, asset stripping, and investment lock-in. Also, there is a have to have for additional clarity on the future of subsidies paid to BPCL’s clients on the sale of LPG and kerosene as properly as the freedom on the pricing of petrol and diesel ahead of the divestment can conclude, it stated.
The government is promoting its whole 53.98 per cent stake in India’s second-biggest fuel retailer Bharat Petroleum Corporation Ltd (BPCL). Three firms, which includes Vedanta Ltd, have evinced interest in acquiring the stake.
“There is more visibility on the progress of the state of India’s divestment of BPCL, following developments on key queries raised by potential buyers, but multiple steps of the process remain outstanding and there are still questions that require further clarity,” Fitch Ratings stated in a statement.
Stating that it will continue to monitor the circumstance and look at appropriate rating action as and when there is progress, it stated watched closely is the progress on interested parties getting safety clearances from the government, access to the information area, the start out of due diligence procedure and submission of monetary bids.
BPCL has produced headway on a important pre-situation to its divestment and other important milestones more than the final six weeks, which includes the finalisation of terms to buy Oman Oil Company’s 36.6 per cent stake in its Bina refinery for Rs 2,400 crore in February 2021.
It also sold 5.8 per cent of its 7.3 per cent treasury shares for Rs 5,500 crore and authorized the sale of its 61.7 per cent stake in Numaligarh Refinery Limited for Rs 9,900 crore in March.
“This results in net proceeds of Rs 13,000 crore for BPCL, less the long-term capital gains tax, although the timing of each transaction may vary,” Fitch stated, adding the effect on BPCL’s Standalone Credit Profile (SCP) will rely on the extent to which the proceeds are used to decrease debt or make dividend payments in the coming year.
BPCL declared an interim dividend of Rs 1,one hundred crore on March 16.
“However, there is still little information about bidders, valuations or potential restrictions for the new owner in relation to employee protection, asset stripping and investment lock-in,” it stated.
“Fitch is also monitoring the progress on interested parties receiving security clearances from the government, access to the data room, the start of the due diligence process, reserve-price disclosure by the government, the submission of financial bids by bidders and the solicitation of lenders’ consent should a winning bid be selected.”
BPCL’s bonds, which had USD 2 billion outstanding as of finish-2020, will have to have to be refinanced or the holders’ consent solicited, need to the government accept a winning bid triggering the adjust of handle clause.
“We believe the extent of refinancing or consent will depend on BPCL’s rating at the time. We do not expect the government to halt the sale should it be dissatisfied with the financial bids, given its budgeted disinvestment target and strongly articulated intent, but this could prolong the process,” it stated.
Fitch stated there is a have to have for additional clarity on the future of subsidies paid to BPCL’s clients on the sale of liquified petroleum gas and kerosene as properly as the freedom on the pricing of petrol and diesel ahead of the divestment.
The government has traditionally utilised oil advertising organizations, which includes BPCL, to carry out its socio-political agenda, but private organizations may well be much less inclined to bear such regulatory danger.
“The sale of the government’s entire shareholding in BPCL would lead to a reassessment of BPCL’s ratings, based on a reassessment of its SCP and the nature of the potential buyers, including the credit quality of any majority parent and Fitch’s assessment of the strength of linkages between the new parent and BPCL,” it added..