Bharat Petroleum Corp. Ltd. To Go Through Divestment Amidst Talks Of Privatisation And Tanking Oil Prices

BPCL
BPCL

The top management of Bharat Petroleum Corp Ltd.  (BPCL) on Monday said that the disinvestment process in on the way and it is only because of some formalities the process is taking some time.

The chairman of Bharat Petroleum Corp Ltd. (BPCL), K Padmakar said to the shareholders of the company, “This (privatization) is expected to unlock tremendous value through the sharpening of professionalism, improvement inefficiencies, increased investments, access to advanced technologies and newer global markets and product diversification, thus propelling future growth.”

The management of the company also informed that they plan to create an employee’s trust to transfer a 2 percent stake held in its investment trust and is likely to sell the balance 7.33 percent stake through block deals on the bourses.

BPCL Trust for Investissement owns 9.33 percent of the company which is required to be sold before the disinvestment process of the company initiates. The government of India plans to sell the entirety of the stake of BPCL. The management of the company further informed that the disinvestment process is set to be completed before March 2021.

ET reported comments of N. Vijayagopal, director- finance who said, “Two percent out of the 9.33 percent will be transferred to the ESPS (Employee Stock Purchase Scheme) Trust, which has been formed for the benefit of the employees. They will get the shares at a discount and the loss would be borne by the company,” to reporters in a virtual press briefing.

He also informed that the rest of the 7.33 percent of the company would be sold in the stock market through block sales. He added, “Out of our total operating cost, other than the crude oil cost, staff cost constitutes a significant portion. We wanted to see this as a cost center and wanted to make a difference by right-sizing of employees, and retain those who can adapt to the new reality, technology, and different culture under private management.”

The second-largest fuel retailer and the third-largest refiner of the country have already been able to reduce the staff count by 10 percent. The company has also managed to bring down the average employee age to around 45 from around 55 by offering a voluntary retirement scheme ahead of the privatization of the company.

During the Annual General Meeting of the company on Monday, the Chairman of the company K Padmakar said to the shareholders, “Your company is at the threshold of a major transformation as it prepares for a definitive change in the ownership structure with the imminent disinvestment of the government of India’s stake in it. This is expected to unlock tremendous value through the sharpening of professionalism, improvement inefficiencies, increased investments, access to advanced technologies, and newer global markets and product diversification, thus propelling future growth.”

The company’s head of marketing A. K. Singh said that the company would continue to import gasoline for the next few months as its crude processing is hit due to reduced demand for diesel. Diesel makes up for 40-45 percent of the total product sale of the company and the drop in demand has affected the company before the disinvestment process. He also informed us that the company’s refineries are working at an 80 percent capacity. He said that the refineries are designed to produce 2.5 tonnes of diesel for every 1 tonne of gasoline produced.

He said, “If diesel demand picks up we will not be required to import gasoline as then we will be processing more crude … diesel is restraining crude throughput … MS (motor spirit) is almost at the pre-pandemic level. Diesel is lagging.”

Amidst the coronavirus pandemic, people are relying on the personal vehicles over the public transports for commute, which saw a hike in gasoline demand. The company expects the diesel demand to pick up during the upcoming festive season.

 

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