Indian Oil mulls picking up Centre’s stake in BPCL

New Delhi: Indian Oil is considering picking up the government's stake in Bharat Petroleum Corporation Ltd (BPCL), an internal note has shown. This is not being done at the behest of the government, but because of concerns at the state-run fuel retailer that privatisation of BPCL could put the oil PSU's market share at risk.

Indian Oil mulls ONGC-HPCL-like deal with BPCL

According to an internal note, the marketing division of Indian Oil discussed in October the "issue of taking the government stake in BPCL or the ONGC stake in HPCL by IOC" with a view to stem risks to its business from a possible disinvestment/privatisation of BPCL. IOC is looking to pick up the entire 53.3 percent government stake in the state-run company.

The benefits of the deal for the new owner

The note also talks about the "pricing flexibility" that BPCL's new owner would enjoy if it has major crude oil assets coupled with experience in oil retailing. This scenario could prove to be detrimental to Indian Oil's interests in the short term. The sale of the government stake in BPCL is expected to fetch around Rs 60,000 crores at current market prices and it could go up to Rs 70,000 crores as the transaction is expected to happen at a premium over the current prices.

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Indian Oil's market share

As of now, Indian Oil owns 43 percent retail outlets in the country, while BPCL has 23 percent and Hindustan Petroleum Corporation Ltd (HPCL) owns 24 percent. One of the possible contenders in the race to buy BPCL is Saudi Aramco, the world's largest oil and gas company. Aramco could team up with an Indian company to bid for BPCL as it looks to invest in India's downstream sector.

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