BPCL disinvestment: Govt amends PIM, allows bidders to create SPV after EoI submission

• DIPAM has said that all interested entities shall be required to incorporate an SPV after the submission of the EoI but prior to the signing of the SPA

• In the case of an interested entity, who is a sole bidder, both the bidder and the SPV created for the purpose of picking up the government's stake in BPCL will have to sign the SPA

New Delhi: The government has made a number of amendments to the preliminary information memorandum (PIM) document for BPCL disinvestment, a notification released by the Department of Investment and Public Asset Management (DIPAM) showed on Friday. The amendments primarily pertain to the criteria for formation of a special purpose vehicle (SPV) or subsidiary or investment vehicle by bidders. The revisions seem to have been introduced in response to a recurring query raised by bidders in which they sought to know the timeline within which an SPV can be formed after being selected as a qualified interested party (QIP).

DIPAM has said that all interested entities shall be required to incorporate an investment vehicle or an SPV or at any time after the submission of the expression of interest (EoI) but prior to the signing of the sale purchase agreement (SPA). 

BPCL PIM amendments: What else does in include?

For a consortium shortlisted in the EoI process for BPCL disinvestment, the PIM requires the shareholding of the consortium members in the investment vehicle to be the same as the shareholding of these members in the consortium. Further, in the case of an interested entity, who is a sole bidder, both the bidder and the SPV created for the purpose of picking up the government's stake in BPCL will have to sign the SPA. 

"If an IP (interested party) satisfies the Net Worth criteria on the basis of the Net Worth of its Parent, then the IP and the Parent both will have to sign the SPA. In case if such IP forms a SPV as specified in Clause 5.2.3 (a) for the Transaction, then the IP, its Parent and the SPV all three will have to sign the SPA," the document said.

Also read: BPCL disinvestment: DIPAM extends bid submission deadline for 4th time to Sep 30

On the net worth eligibility criteria, the revised PIM said, "The Net Worth eligibility criteria shall be met by the entity into which the accounts of the IP are consolidated ("Parent") while all the other eligibility criteria should be satisfied by the IP. Each of these entities i.e. the Parent, IP and the SPV will have to ensure that it is not disqualified as per the criteria listed for disqualification." It also added that an entity submitting the EoI cannot be replaced by another subsidiary of its parent company or an SPV created by its parent company at any stage of the proposed transaction. 

A revised clause inserted in the document on the issue of security clearance says, "Necessary Security clearance shall be taken as per the details and requirements communicated to the QIP at the time of RFP."

The backdrop

The government has extended the deadline for submission of bids for the strategic disinvestment of BPCL to September 30 in the wake of requests from interested bidders and the "prevailing situation arising out of COVID-19." For fiscal year 2020-21, the government's big strategic disinvestment plan includes Air India, BPCL, CONCOR and Shipping Corporation of India, and LIC IPO.

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