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BPCL issue may be priced at Rs 300

Abharajit Gangopadhyay
C. Shivkumar

After the IPO, the stake is likely to come down further to about 57 per cent. But the Government has not ruled out the possibility of bringing down its stake in BPCL even below the threshold level of 51 per cent in this company.

BANGALORE, June 26

THE public sector Bharat Petroleum Corporation Ltd (BPCL) is expected to price its initial public offering close to Rs 300 per share.

The BPCL Chairman and Managing Director, Mr S. Behuria, said: "The pricing reflects the energy sector's price-earnings ratio.'' Currently, the market price of about Rs 280 discounts earnings by at least 10 times the last year's earnings.

"We are working out the details and the offer will be entirely through the book-building route," he told Business Line. But the issue would need to be approved by the Union Cabinet.

On Tuesday, the Union Minister of Petroleum and Natural Gas, Mr Ram Naik, had stated that the IPOs of all the petroleum PSUs would be cleared in two months by the Cabinet.

BPCL's plans follow IPO proposals by Indian Oil Corporation and HPCL. The domestic oil companies' stocks are on a bull run, on the back of the proposed disinvestment. The funds raised through the IPOs will be used to fund greenfield refineries and expansions of existing operations. BPCL is planning to invest at least Rs 6,000 crore for building a refinery in Bina, Madhya Pradesh.

The issue is likely to dilute the Government's stake in BPCL. Currently, the Government holds 66.2 per cent of the stake. After the IPO, the stake is likely to come down further to about 57 per cent. But the Government has not ruled out the possibility of bringing down its stake in BPCL even below the threshold level of 51 per cent in this company.

Asked about any possible consolidation prior to the IPO, Mr Behuria ruled out a possible merger of its subsidiary Kochi Refineries with itself citing that "there is no clash of interests" between the two refineries. "We could look into such possibilities at a later stage...now we are happy with the dividend returns from our subsidiary," Mr Behuria said. BPCL has a 55.07 per cent stake in Kochi Refineries Ltd. BPCL is already marketing Kochi refinery products.

With the administered prices being completely dismantled BPCL has started importing oil directly post April 1, both for its own refineries as well KRL. About 60 per cent of the imports were being sourced through forward contracts including inter-governmental arrangements. Only the remaining 40 per cent was being sourced from the spot markets. Till April this year, crude imports were done by Indian Oil Corporation. BPCL feels that the mix is expected to remain the same, despite global oil prices shooting up to as much as $25 per barrel over last one month.

Besides Kochi Refineries, BPCL is also a majority stakeholder in Numaligarh Refineries, where it has a stake of 62 per cent. But NRL is expected to independently market some of the products, and has been allowed to set up 510 retail outlets for the purpose.

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