BPCL is a promoter of two firms, and since the promoter firm’s ownership has changed, the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations require an open offer.

Getting ready for privatisation According to insiders, Bharat Petroleum Corporation (BPCL) may sell a portion of its investment in Petronet LNG and Indraprastha Gas (IGL) in order to lose its promoter status and avoid having to make open offers for the two gas businesses.

BPCL owns 12.5% of Petronet, India’s largest liquefied natural gas importer, and a 22.5 percent stake in IGL, India’s largest city gas reseller. It is a promoter of both listed firms and sits on their boards of directors.

According to the legal position analysed by DIPAM – the department in charge of the sale of the government’s whole 52.98 percent ownership in BPCL – the acquirer of BPCL will have to make an open offer to the minority shareholders of Petronet and IGL for acquisition of 26 percent shares, according to three persons familiar with the situation.

This is because BPCL is a promoter of both companies, and since the promoter firm’s ownership has changed, the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 require an open offer.

According to reports, BPCL might sell a portion of its stake in the two companies and lose promoter status, avoiding the need for open bidding.

BPCL, on the other hand, believes that selling the shareholding and relinquishing promoter status and directorships would result in significant value erosion for the company.

However, government officials believe that the open offers for Petronet and IGL will prevent bidders who are primarily interested in BPCL’s oil refining facilities and 22 percent stake in the fuel marketing company, according to sources.

A spokesman for BPCL declined to comment on the storey.

At the current share market price, the government’s 52.98 percent ownership in BPCL is worth almost Rs 54,000 crore. The obligation to make an open offer to minority shareholders for an additional 26% of the firm will cost an additional Rs 26,700 crore.

An open offer for a 26% interest in IGL would cost an additional Rs 9,400 crore, while a similar offer for Petronet would cost more than Rs 9,300 crore.

The company also has an upstream presence in nine countries, including Russia, Brazil, Mozambique, the United Arab Emirates, Indonesia, Australia, East Timor, Israel, and India, with 26 assets. It’s also branching out into city gas distribution, with 37 licences under its belt (GAs).