Disinvestment: BPCL, Air India deals to conclude by July-August

On November 16, three bidders showed interest for BPCL buyout — Vedanta, Apollo Global Management and Think Gas.

The shortlisted bidders for fuel retailer-cum-refiner BPCL and national carrier Air India (AI) are likely to be asked to submit their financial bids in a couple of months, as the government intends to complete the two transactions latest by July-August if not early, an official source told FE.

Even though the department of investment and public asset management (Dipam) had set a target to complete the transactions by June-end, the government may have to give shortlisted bidders a little bit of extra time if needed to complete their due diligence of the companies and their assets.

“Covid-19 has affected travel, especially from overseas. Some bidders may need to bring in experts from overseas for valuation of the assets and/or physical verification of plants and equipment to assess their real worth,” the official said.

On November 16, three bidders showed interest for BPCL buyout — Vedanta, Apollo Global Management and Think Gas.

After failing to conclude most of the big ticket deals including BPCL sale in FY21 and pared the target to just Rs 32,000 crore from initial estimate of an ambitious `2.1 lakh crore, the Centre is serious about achieving Rs 1.75-lakh-crore target for FY22.

The value of the Centre’s 53% stake in BPCL, which was down 35% to Rs 39,000 crore as on October 16, 2020, from Rs 60,000 crore in November 2019 (around the time the stake sale proposal was approved by the Union Cabinet), has recovered to a little over Rs 50,000 crore as on Tuesday. However, the actual receipts will depend on valuation and consideration of a premium.

BPCL operates four refineries in India, Mumbai Refinery (1955), Kochi Refinery (1966), BORL-Bina Refinery (2011) and Numaligarh Refinery (1999) with a combined crude oil refining capacity of 38.3 MMTPA (766 KBPD). BPCL’s stake in Numaligarh refinery will be sold to another CPSE oil firm separately.

The officials are optimistic of the AI deal going through this time. The bids for AI are likely to be under Rs 20,000 crore. The Centre could get about Rs 3,000-crore cash. With Covid-19 hitting the aviation sector hard, Air India has estimated that its cash losses would rise 80% on year to Rs 6,000 crore in FY21. Air India CMD Rajiv Bansal had said that the carrier’s losses could be around Rs 8,000 crore in FY21.

Besides BPCL and AI, strategic disinvestment pipeline for this fiscal includes Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML and Pawan Hans – are all expected to be completed in FY22. Additionally, privatisation of two public sector banks and one general insurance company are to be taken up in FY22.

The IPO of LIC was the second biggest component of the budgeted disinvestment target for this fiscal. While the valuation of the insurer – which often plays White Knight to the government – will be known closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, meaning a 10% IPO could fetch the government Rs 80,000-110,000 crore.

The LIC IPO may hit market in the third or fourth quarter of this year as preparation of embedded value and restatement of accounts of LIC may to take about six months.