Govt permits 100% FDI in oil PSUs approved for disinvestment; to aid BPCL sale
The government on Thursday permitted 100 per cent foreign investment under the automatic route in oil and gas PSUs which have received in-principle approval for strategic disinvestment. The move would facilitate privatisation of India’s second biggest oil refiner Bharat Petroleum Corp Ltd (BPCL). The government is privatising BPCL and selling its entire 52.98 per cent stake in the company. According to a press note of the Department for Promotion of Industry and Internal Trade (DPIIT), a new clause has been added to the FDI policy for oil and natural gas sector. “Foreign investment up to 100 per cent under the automatic route is allowed in case an ‘in-principle’ approval for strategic disinvestment of a PSU has been granted by the government,” it said. The decision regarding this was taken by the Union Cabinet last week. Two out of the three companies that have put in an initial expression of interest (EoI) for buying out the government’s entire 52.98 per cent stake in BPCL are foreign entities. The FDI limit in PSU-promoted oil refineries will continue at 49 per cent — a limit that was set in March 2008. As of now, the government is selling the stake in only BPCL. Indian Oil Corporation (IOC), the nation’s largest, is the only other oil refining and marketing company under direct government control. Hindustan Petroleum Corporation Ltd (HPCL) is now a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC). The government had in March 2008 raised the FDI limit in oil refineries promoted by public sector companies from 26 per cent to 49 per cent. The firm acquiring the government’s 52.98 per cent stake in BPCL will also have to make an open offer to buy an additional 26 per cent stake from other stakeholders at the same price, as per the takeover rules. Mining-to-oil conglomerate Vedanta and US-based private equity firms Apollo Global and I Squared Capital’s arm Think Gas are in the race to buy the government’s stake in BPCL.
India’s top refiner IOC reports three-fold surge in quarterly profit
Indian Oil Corp Ltd (IOC) , the country’s top refiner, on Friday reported a three-fold rise in net profit in the June quarter, helped by higher gross refining margins as prices of oil products surged. The state-owned company had reported a net profit of 59.41 billion rupees ($798.92 million) in the quarter ending June 30, compared with a profit of 19.11 billion rupees a year earlier, when lockdowns due to the COVID-19 pandemic hammered fuel demand and squeezed margins. Analysts were expecting a net profit of 42.48 billion rupees for the first quarter, according to Refinitiv data. Even though India was battered by a second wave of coronavirus infections during April and May, the restrictions imposed were not as severe as last year, with most states allowing vehicular movement. The company recorded gross refining margins – profit from converting a barrel of oil into refined products – of $6.58 per barrel in the three months to June compared with minus $1.98 per barrel a year earlier. Revenue from operations for quarter rose to 1.55 trillion rupees from 889.39 billion rupees a year ago. IOC and its unit, Chennai Petroleum, control about a third of India’s five million-barrels-per-day refining capacity.