Hyderabad: In principle, Cabinet gives approval for the strategic investment of five CPSE is including BPCL. However, Numaligarh Refinery Limited (NRL) will be carved out of BPCL before the strategic disinvestment and will be taken over by any other PSU or retained by Govt.
"Strategic disinvestment would imply the sale of a substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control”.
The Finance Minister Nirmala Sitharaman said this is not only sale of a couple of shares, rather entire management will be transferred. NITI Aayog bases this decision of Government on the recommendation.
Market analysts are of the opinion that these steps are in the right direction, as the government has “no business to be in business”. This is a positive development in line with market expectations. These divestments, unlike earlier ones, are to strategic investors, along with transfer of management control. This will surely help in discovery of their real valuations.
Expert opinion is that the true value of these CPSEs will be discovered, helping the stocks gain more ground, especially in the case of BPCL. Strategic divestment of oil marketing companies to private parties, analysts say, is generally filled with fantasies of rich valuations.
Read more:OIL may pick up BPCL's stake in Numaligarh Refinery
A stake in any of the OMCs in India will provide the buyer ready access to the third largest and one of the fastest-growing petroleum markets globally. “BPCL trades at 2.4x FY20 price-to-book (PBV) and 10.7x FY20 EV/Ebitda." Compared with this, global peers trade at 1.2x FY20 PBV and 6.7x FY 20 EV/Ebitda. Therefore, BPCL seems to be a better venture compared to its global peers.
Saudi Arabia is looking at making investments in India potentially worth USD 100 billion in the areas of energy, refining, petrochemicals, infrastructure, agriculture, minerals and mining. Saudi Arabia's biggest oil giant Aramco's proposed partnership with Reliance Industries reflected the strategic nature of the growing energy ties between the two countries.
Investing in India's value chain from oil supply, marketing, refining to petrochemicals and lubricants is a key part of Aramco's global downstream strategy. Hence, Aramco is also interested in buying stakes of BPCL to add up to its global business.
It is important to note here the reasons of carving out NRL from the BPCL disinvestment process. The Numaligarh Refinery Employees’ Union (NREU), which has been protesting against the possibility of its privatisation, welcomed the decision. Assam Chief Minister Sarbananda Sonowal had recently written to Prime Minister Narendra Modi requesting him to “maintain the PSU status of NRL even if BPCL is privatised and disinvested”.
In addition, The All Assam Students’ Union (AASU), one of the signatories to the Assam Accord, appealed to the Centre against the privatisation of state assets in the future. The Numaligarh Refinery was established as part of the Assam Accord. We want to request the Centre not to privatise state assets in the future,” said Anshuman Bora, president of the AASU’s Golaghat unit. Congress parliamentarians Gaurav Gogoi, Ripun Bora, Pradyut Bordoloi and Abdul Khaleque had staged a ‘dharna’ outside Parliament. The placards they carried read: “Numaligarh Refinery – Heartbeat of Assam” and “Save Assam, Save India”
(Dr. Hiranmoy Roy is the Head of Department of Economics and International Business at University of Petroleum and Energy Studies, Dehradun)
