Gandhar Oil Refinery IPO’s giddy success exposes the sloppiness holding up BPCL disinvestment
Bharat Petroleum Corporation Ltd (BPCL), and offered a bright picture for its disinvestment. But the market does not think so. Since March, the scrip has not budged at all.
The primary reasons are obvious. BPCL has deep pockets with a capex budget of Rs10,000 crore, but its strategy makes little sense. The company prides itself as India’s third-largest oil refining company with a share of 13.90% of the market, but beyond that has little to offer.
The company is not the market leader in any of its business lines--refineries, LPG, retail, city gas, or lubricants. BPCL is an all-weather friend, producing a little of everything. So its foray into the petrochemicals business from its Kochi refinery, the largest among the state-run ones, at 15.5 MMTPA, with an aggregate investment of Rs6,500 crore, has also not stirred the investors.
Both Indian Oil and ONGC subsidiary, Hindustan Petroleum Corporation Ltd (HPCL), have a clearer line of sight to this business; Reliance Industries Ltd is, of course, way above the league. A big reason for the ho-hum attitude of the market towards BPCL has got to do with its lack of effort to gain a leadership role. The company and its owner, the government of India, do not seem to have any clear idea where to slot it.
Evidence of this is how in recent years the company has also got into the upstream exploration business. In 2016, BPCL picked up stakes in two Russian oil fields, moving on to the UAE, and is now into six countries. Since it has little money to offer here, the current year’s exploration budget is just Rs2,150 crore.
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