BPCL to hike Petronet CCK stake by 26%

Bharat Petroleum Corporation (BPCL), the country's third largest marketer of petroleum products, is all set to increase its stake in Petronet CCK by 26 per cent. BPCL has accepted the offer to buy the stake from Petronet India (PIL), which is winding up its operations. After the deal, BPCL stake in Petronet CCK will go up to 52 per cent.

"BPCL has accepted our offer. The transaction will take place soon," PIL Managing Director Anand Teltumbde said. Teltumbde is also on the board of Petronet CCK.

Petronet CCK, operates a 292 km petroleum product pipeline from BPCL's Kochi refinery to the company's oil terminal at Karur in Tamil Nadu. The company was set up under the aegis of Petronet India to construct and operate the pipeline from Kochi to Karur, with a tap off point at Coimbatore. PIL will soon offer its 26 per cent stake in its other joint ventures with the oil companies for sale to its joint venture partners, Teltumbde said. PIL has joint ventures with Indian Oil Corporation called Petronet VK, with BPCL called Petronet CCK and with Hindustan Petroleum called Petronet MHB.

In the joint ventures PIL holds 26 per cent and the oil companies another 26 per cent. In Petronet CCK, the other investors are Kochi Refineries (23 per cent), which is a BPCL subsidiary, State bank of India (4.99 per cent), IDFC (19.97 per cent) and Infrastructure Leasing and Financial Services (0.04 per cent).

"PricewaterhouseCoopers has completed the valuation of Petronet CCK and the report has been submitted to BPCL. Petronet India's board has approved the stake sale and an offer has been made to BPCL," a senior BPCL official said. The 26 per cent stake is estimated at around Rs 13.53 crore.

"With the expansion of Kochi refinery, Petronet CCK will be important to BPCL for transporting products to our installations at Coimbatore and Karur," the BPCL official said.

The state-owned company already has an agreement with Petronet CCK for transporting refinery products from the Kochi refinery till 2012-13.

Once the 26 per cent stake in Petronet CCK is bought, BPCL, which is also constructing a grassroot 6 million tonne per annum refinery at Bina in Madhya Pradesh, will have the option of completely buying out Petronet CCK and merging it with itself, the official said. Petronet India is a financial holding company in which Indian Oil Corporation, Hindustan Petroleum and BPCL jointly hold 50 per cent of the equity stake. Private sector companies Essar Oil, Reliance Petroleum and other investors hold the balance equity.

PIL was to build pipelines on the common carrier principle. However, most of the companies that were to benefit from the projects did not agree on signing take-or-pay agreements with Petronet India. With the government granting companies the freedom to set up their own pipelines, the need for PIL diminished leading to its plans for liquidation.