MUMBAI: The government's plan to sell its stake in Bharat Petroleum Corporation Ltd may not happen this fiscal, thanks to the adverse impact of coronavirus outbreak on businesses and a record slump in global crude oil prices, according to officials aware of the discussions.
The spread of the virus to more than 210 countries has brought world economy to a standstill, with the International Monetary Fund (IMF) projecting global growth to fall to -3% this year. Over 195,000 people have died of the virus so far.
Added to this is the global slump in crude oil prices which has dealt a blow to valuation of companies.
"BPCL is a good asset. But at a time when the world is under a lock down and businesses have suffered, companies are looking at preserving cash. Acquisitions can wait," an energy consultant, aware of the discussions, said on the condition of anonymity.
Brent crude prices, the international benchmark, fell to a historic low of $16 per barrel on 22 April. It has fallen 39% so far in the month.
BPCL share price has tumbled 25% to ₹ 350.65 per share since 24 January.
Based on the current market cap, the government stake in BPCL is valued at around ₹ 40,299 crore. The Union Cabinet had cleared the proposal for strategic sale of government’s stake in BPCL on November 20, 2019.
Amid lockdown in many countries, including India, the government had on 31 March extended the deadline for submission of expression of interest (EoI) for privatization of BPCL by more than a month to 13 June.
Interested bidders can now submit preliminary information memorandum by 16 May instead of 4 April earlier and EoIs by 13 June instead of 2 May, notified earlier.
“The above changes are in view of the requests received from the interested bidders (IBs) and the prevailing situation arising out of covid-19. Further changes with respect to the Important Dates, if any, will be communicated to the Interested Bidders subsequently," Department of Investment and Public Asset Management (DIPAM) had said in a notification.
Though the Assam government, last week, gave its no-objection certificate for the sale of BPCL's 61.65% stake in Numaligarh Refinery (NRL), a government official said BPCL stake sale may not happen this year.
"Global crude oil prices have crashed. For upstream producers crude oil price in the range of $50-60 per barrel is a comfortable level. Prices below that, will impact their their operations. And with demand not taking off anytime soon, we do not think the prices will be back to their $60 per barrel level anytime soon. Companies would put off expansions and investment plans. Besides the valuation of these companies will also come down," said a senior official from one of the state run oil marketing companies.
For the 52.98% government stake in BPCL, only private companies with a net worth of more than $10 billion are eligible.
