New Delhi, Aug 22 : A potential treasury stock sale of 9.33 per cent in Bharat Petroleum Corporation Ltd (BPCL) would signal progress on the companys privatisation and the potential bidders have also raised queries on this.
"Any move by BPCL to sell the large treasury stock (part of BPCL Trust, 9.33 per cent) would be very positive, in our view, as it would signal progress on resolving the key issues related to privatisation," according to foreign brokerage, J.P.
Morgan.
"We would expect BPCL to distribute any proceeds from a treasury sale as dividends", the report said.
There have been media reports that BPCL Trust "is exploring options" to sell the 9.33 per cent stake (202 million shares) in BPCL, with roadshows having started.
The Trust held the shares following the merger of the Kochi refinery.
The 9.33 per cent stake would be worth Rs 83 billion.
The report said among the issues raised by potential bidders was treasury share cancellation and what would be done, the response was that the government would sell 1.14 billion shares, and the treatment of the treasury shares would be communicated at the time of requests for proposals.
The research points out that the treasury stake sale makes sense from a privatisation transaction viewpoint.
If the treasury shares were to be cancelled, the government's current 52.98 per cent stake would increase to 58.43 per cent and, with the mandatory open offer of 26 per cent, a buyer's stake would increase to 84.43 per cent.
Further, unless a buyer would want to delist BPCL, it would have to come back to the market and sell down a 10 per cent stake to comply with the 75 per cent holding rule, the report said.
"Selling down the treasury stake and keeping the treasury stock in circulation would maintain the government stake at 52.98 per cent and, with the mandatory open offer of 26 per cent, would increase the stake of any eventual buyer to 79 per cent; while a buyer would still need to sell down, the quantum would be smaller," the report said.
"More important, by monetizing the treasury stake, BPCL could distribute it as dividends (works out to Rs 29 a share), with the government netting Rs 44 billion," the report said.
The other issues which require resolution are completion of the NRL refinery stake sale; and clarity on BORL refinery control.
While the government has clarified that BPCL's stake in NRL would be sold to other SoEs, there has been no progress so far, the report said.
The other issue is the status of the BORL refinery: BPCL has clarified that it is now the majority shareholder, but it still classifies the investment as a joint venture, as management control is shared.
At the latest analyst meet, BPCL management clarified that it is in the process of resolving the BORL issue.
In our view, both these issues
need to be resolved before any privatisation, the report said.
--IANS
san/sdr/.
Source: IANS
