Bharat Petroleum Corporation - Bidding for privatisation possible in Aug'21 - ICICI Securities

Key takeaways from BPCL's earnings call and media interviews are:

- Refinery utilisation down to 86-87% in May'21-TD from 100% in Apr'21 as auto fuel sales plunged: BPCL's refinery utilisation is down from well over 100% in Q4FY21 to 100% in Apr'21 and further to 86-87% in May'21-TD as auto fuel sales in May'21-TD are down 30-31% vs levels in May'19. Auto fuel sales were down 4.2-8.3% in Apr'21 vs Apr'19 level vs 3.3-8.8% fall for industry and 5-11% for OMCs.

- Bidding for privatisation possible in Aug'21 if site visit is complete by Jul'21: BPCL had opened virtual data room on 10-Apr'21 for potential bidders. From 28-May'21 top management of BPCL will be available for discussion with potential bidders who have made the request. All potential bidders have requested for physical verification of key assets such as refineries but no international flights have meant site visits have not been possible. Bidding by potential bidders is possible in Aug'21 if resumption of international flights allows physical verification by end-Jul'21.

- Stake sale in BPRL, IGL and PLNG unlikely: When asked if it may sell stake in upstream subsidiary BPRL before privatisation, BPCL said such a stake sale is not approved by CCEA and it is also unlikely as it is too late in the day. For the same reasons any stake sale in IGL and PLNG is also unlikely before privatisation.

- SEBI exemption being sought for open offer to PLNG and IGL shareholders by successful bidder in privatisation: As per SEBI regulations, successful bidder in privatisation would have to make an open offer to shareholders of IGL and PLNG given BPCL's promoter status. BPCL and GoI are seeking an exemption from the market regulator SEBI for open offer to PLNG and IGL's shareholders. Another option is BPCL selling its stake in PLNG and IGL, but BPCL is averse to any stake sale and appears confident of getting an exemption from SEBI in the matter.

- BORL to be merged with BPCL post 100% stake acquisition: BPCL expects to close the acquisition of Oman Oil's 36.32% stake in BORL for a consideration of Rs24bn by 15-Jun'21. Government of Madhya Pradesh (MP) has warrants translating to 0.63% stake which will also be bought out. Once 100% stake is acquired, BORL would be merged with BPCL (likely in FY22E). 2% CST, which has to be paid on large volumes sold outside MP, will not have to be paid post-merger.

- PDPP project on stabilisation to boost GRM by US$1/bbl: Two of the three units of propylene derivatives petrochemical project (PDPP) have been commissioned in Q4FY21 and the third is being commissioned. Production is expected to ramp up in H2FY22 and on stabilisation will boost GRM by US$1/bbl based on likely propylene transfer pricing. Further gains are likely from propylene derivatives' margins.

- Capex stood at Rs111bn in FY21 and is guided at Rs120bn in FY22E.

- Subsidy dues from GoI are down from Rs66bn in Mar'20 to Rs3bn in Mar'21.

Shares of BHARAT PETROLEUM CORPORATION LTD. was last trading in BSE at Rs.471.6 as compared to the previous close of Rs. 467.75. The total number of shares traded during the day was 754162 in over 14831 trades.

The stock hit an intraday high of Rs. 480 and intraday low of 468.6. The net turnover during the day was Rs. 357516951.

Source : Equity Bulls

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