Single bid for BPCL wouldn't have helped fetch a better price: DIPAM Secy

Tuhin Pandey says LIC investors should be patient and look at the insurer's long-term prospects

Only one bidder vying for BPCL would not have helped in better price discovery, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey told Nikunj Ohri, while pointing out that the government would wait to assess the situation before proceeding further. In a conversation on wide-ranging issues, Pandey also said LIC investors should be patient and look at the insurer’s long-term prospects. Edited excerpts:

How would the new BPCL privatisation process be different?

Several uncertainties including the Covid-19 pandemic impacted the transaction. Energy transition, geopolitical tensions and several jurisdictions having decarbonising targets made it difficult for investors to invest in refining. There’s some uncertainty on consortium formation due to the size of the deal too. With the investors withdrawing bids, the government will wait for a while to assess the situation and decide how to proceed further. This would also involve restructuring the transaction after a comprehensive review. There is no presently available solution. The oil and gas sector has gone through a turmoil globally in the last two years and the initial interest did not sustain till the conclusion of the transaction.
 

What will be the learning from the current privatisation process?

PSU privatisation is being done transparently-- when a transaction is not going through a competitive bidding process, we are calling off the deal. A single-bid solution is also possible after openly advertising, but it will not help in better price discovery. This was the advice from ministers’ panel as well that in a deal like BPCL, competitive price discovery is needed. Market price can be determined but since the government will be ceding control in BPCL, the price will have to include a control premium which will have to be discovered with at least two parties vying for the asset.

What are the government’s plan to sell stake in HZL?

Offer for sale (OFS) is the preferred method to consider. That has been our stance.  We will go ahead with OFS in tranches as it cannot be done in one go.

What is your advice to LIC investors as the share price has dropped since the listing?

We have maintained that LIC will generate value in the medium to long term. The organisation is very unique and there will be a lot of changes in the way LIC will perform as a listed entity. Investors should be patient as it has just been two weeks since LIC has listed.

What has been the update on CONCOR privatisation?

The Ministry of Railways is working on the land licensing policy which will give a push for PM’s Gatishakti scheme. The policy is expected soon.  Then, DIPAM would move ahead with the EoI for CONCOR. We want to provide clarity and certainty on land as the business would depend on that.

When will the government invite bids for IDBI bank sale?

We are planning to come out with an expression of interest for IDBI Bank sale by end-June. The plan is to complete the transaction in the current financial year provided there is adequate interest from bidders, and there aren’t any calamities or court cases. Roadshows are being conducted presently.

The process to initiate privatisation of two other public sector banks will also be initiated.

What's the update on CEL and Pawan Hans privatisation?

The issue with Pawan Hans sale has just come out and we are legally examining it. The current open and transparent process allows questioning of the transactions, and the government has adequate safeguards. In commercial decisions, certain things are inevitable and certain information on bidding for any other company is confidential and cannot be sought from bidders. The ministers’ panel would soon decide on the CEL privatisation. We are trying to improve disclosures so that transaction advisors have more information to track.