BPCL to pay shareholders from Rs 9,876 cr Numaligarh Refinery stake sale

Privatisation-bound Bharat Petroleum Corporation Ltd (BPCL) may use Rs 9,876 crore proceed from stake sale in Numaligarh Refinery to pay a special dividend to shareholders, the biggest being Government of India, BPCL director (finance) N Vijayagopal said on Tuesday.

The Board of BPCL on Monday approved the sale of the company's 61.65 per cent stake in Numaligarh Refinery Ltd (NRL) to a consortium of state-owned Oil India, consultancy firm Engineers India Ltd (EIL) and Government of Assam for Rs 9,875.96 crore.

The offer by the OIL-led consortium was "above the reserve price we had set for the stake sale," he told reporters.

BPCL will seek approval of the shareholders at a meeting on March 25 and plans to sign the sale pact within two days of that and conclude the transaction before month-end, he said.

The proceeds from the stake sale will be used to buy out Oman Oil's stake in Bina refinery, pay capital gains tax and pay a dividend to shareholders, he said. "Definitely a portion (of the proceeds) will go to the shareholders as dividend as we have a healthy tradition of rewarding shareholders."

Before the government sells its entire stake in BPCL, the company is exiting NRL and buying out a 36.62 per cent stake held by OQ S.A.0.C. (formerly known as Oman Oil Company S.A.0.C.) in Bina refinery for Rs 2,399.26 crore.

"We are very happy with the price that we got from OIL-led consortium," he said.

He however refused to speculate on the quantum of the dividend the company will pay out.

The government holds 52.98 per cent stake in BPCL and will be the biggest beneficiary of any such special dividend payout.

BPCL, he said, may also use a part of the proceeds to retire some high-interest bearing borrowings even though the debt was at a comfortable level of around Rs 25,000 crore now.

The stake sale in NRL clears the way for privatisation of India's second-largest fuel retailer.

In keeping with the Assam Peace Accord, the government had decided to keep NRL in the public sector. To ensure this, it was decided that BPCL will sell its entire 61.65 per cent stake to state-owned firms.

A consortium of OIL, EIL and Government of Assam expressed interest in buying the stake and the BPCL board on Monday approved the sale.

OIL currently holds 26 per cent equity in NRL while Government of Assam has around 12.35 per cent.

"EIL will take 4.37 per cent for the Rs 500 crore it had provided for the acquisition. Government of Assam will pick up 13.65 per cent to raise its holding to 26 per cent and the balance would go to OIL," he said.

OIL shareholding in NRL would rise to 69.63 per cent.

Vijayagopal said in case the Assam government is unable to buy its allocated share, that portion would also go to OIL.

NRL operates a 3 million tonnes per annum oil refinery in Assam.

Post NRL sale, BPCL would be left with three refineries at Mumbai, Kochi (Kerala) and Bina (Madhya Pradesh), which together make up for 14 per cent of India's oil refining capacity.

The government is selling its entire 52.98 per cent stake in BPCL in the nation's biggest privatisation till date.

Vedanta Group and private equity firms Apollo Global and I Squared Capital's Indian unit Think Gas have put in an expression of interest for buying the government's stake.

The sale of NRL is the first step towards the disinvestment of BPCL.

The government has already indicated that it expects to complete BPCL privatisation by the first half of the fiscal year beginning April 1 (2021-22).

The sale is key to achieving the Rs 1.75 lakh crore disinvestment target set for 2021-22.

BPCL will give the buyer 35.3 million tonnes per annum of refining capacity and 22 per cent of the fuel marketing share.

The firm owns 18,026 out of 74,951 petrol pumps in the country, 6,144 out of 24,952 LPG dealers and 61 out of the nation's 257 aviation fuel stations.

It has 28.45 per cent of retail petrol and diesel market share, 26 per cent of LPG market and a 22.73 per cent market share in ATF.

Its petrol pumps sell more fuel than any other state-owned firm, with an average per pump thruput of 134 kilolitres per month against the industry average of 125 kilolitres.

NRL is looking to expand its refining capacity from 3 million tonnes per annum to 9 million tonnes a year at an investment of Rs 22,594 crore. The project is expected to be complete by 2024.

The expansion also involves setting up of crude oil pipeline from Paradip in Odisha to Numaligarh and a product pipeline from Numaligarh to Siliguri in West Bengal.

In the run-up to the privatisation, BPCL last month agreed to buy out Oman Oil Company's shares in the Bina refinery project for about Rs 2,400 crore.

BPCL holds 63.68 per cent stake in Bharat Oman Refineries Ltd (BORL), which built and operates a 7.8 million tonne oil refinery at Bina. It will buy 36.62 per cent of the equity share capital from OQ S.A.0.C. (formerly known as Oman Oil Company S.A.0.C.) for Rs 2,399.26 crore.

BORL was incorporated in February 1994 to build a refinery at Bina. The unit initially could turn 6 million tonnes of crude oil annually into fuel, which was subsequently raised to 7.8 million tonnes.