BORL may sell 20% Bina stake

Bharat Oman Refineries (BORL), the special purpose vehicle implementing the Bharat Petroleum's (BPCL) 6 million tonnes per annum (mtpa) refinery at Bina in Madhya Pradesh, is in talks with strategic investors for selling 15-20 per cent stake.

"We are in preliminary talks with a number of crude oil producers such as Saudi Aramco and Petrobras. A final decision is likely to be reached by the middle of next year," said R P Singh, managing director, BORL.

Singh added that the stake would be sold only to a supplier of crude oil as it would make strategic sense. Some stake may also be sold to financial institutions.

The talks with Saudi Aramco and Petrobras are on despite the fact that global refiners and crude oil producers have been reluctant to buy into Indian inland refineries as they are not strategically located for exports. British Petroleum, Kuwait Petroluem and Saudi Aramco had previously pulled out of new refineries being set up by Indian Oil and Hindustan Petroleum.

BORL will also offer 25-30 per cent stake to the public in a maiden offer. "By offering 25 per cent stake to the public, we may raise over Rs 1,000 crore," Singh said.

The process is likely to be kicked off by October this year, since the offer was announced in March.

After the stake sale and the public issue, BPCL and Oman Refineries, the promoters of BORL, will together hold 52 per cent in the refinery. Oman refineries, which has already put in Rs 75 crore as equity in BORL, will have a 2 per cent stake.

The refinery, which was conceived almost 10 years ago, is being built at a cost of Rs 10,378 crore and a debt-equity ratio of 1.6:1. The debt component of Rs 6,387 crore has already been tied-up with 14 banks led by State Bank of India. The first tranche of around Rs 1,000 crore has been disbursed to BORL with the second tranche expected to be disbursed this month.

Singh said the refinery would sell its products to the north and central Indian markets. "We have a captive market through a take or pay agreement with BPCL. BPCL's demand for petroleum products in the region is 6 million tonnes," Singh added.

The refinery is coming up in an area close to 200 acres, which provides enough space for future expansion. "Over the next 10-15 years, the refinery will be expanded steadily to the full provision of 18 mtpa," Singh said.

He also ruled out the possibility of a petrochemical complex attached to the refinery. "A petrochemical complex makes sense only if the size of the refinery is 12 mtpa and above. There is no plan for a petrochemical plant in the next five years," he said.