PSU disinvestment: Minority shareholders to gain from privatisation, says BPCL
Privatisation more likely than stake sale to IOC: Press reports suggest government of India (GoI) is considering selling its entire stake in Bharat Petroleum Corp (BPCL) to Indian Oil Corp (IOC) or to a private player. Privatisation would realise a higher price, may help take politics out of auto fuel pricing, would ensure IOC’s ability to pay hefty dividend to GoI is not impaired, prevent further supply overhang in ONGC and may improve market sentiment as it would be seen as big bang reforms.
The NDA government in 2016 obtaining Parliament’s approval to privatise BPCL and expert committee set up in 2018 to suggest ways to increase competition in auto fuels suggests GoI may opt for privatisation. Minority shareholders would gain (open offer at transaction price) if BPCL is privatised. Reiterate ‘Buy’.
Privatisation of BPCL more advisable than stake sale to IOC: Privatising BPCL is advisable as privatisation through competitive bidding would realise a higher price.
