Privatisation of BPCL priced between $6.9 bn and $10.3 bn

Credit Suisse informed the media that the reserve price is expected to be approximately Rs 500 per share, and post dividend (Rs 50-60 per share), the government's stake is worth $6.9 billion. Post the open offer, the maximum outflow would be $10.3 billion, the global wealth manager added.

It has also been noted that the buyer can halve the capital expenditure (capex) at BPCL and sell non-core assets to the tune of $4 billion. Among the bidders, Apollo Global has done a deal of this size, while Vedanta has partnered with Centricus.

The firm said that steady-state earnings before depreciation, interest, taxes and amortisation (EBITDA) for BPCL could be $2 billion to $2.5 billion. The higher end of range is possible when the potential acquirer is able to reduce refining costs, increase the productivity of marketing outlets, and increase non-fuel revenues.

The macro is also improving for the refining sector, with inventories now down for both diesel and gasoline, and the cracks have started improving.

The investment banking company said that there is ample scope to boost steady-state EBITDA by $450 million. According to Credit Suisse, refining cost reduction can boost EBITDA by $150 million, higher non-fuel EBITDA at marketing outlets can add $100 million, and higher footfalls can add $200 million.

BPCL kicked off with project Nishchay in the financial year 2016 to promote non-fuel revenues, but it gave up on most of the initiatives in two to three years. Even the current app SmartDrive for customers does not have real-time data at the outlets, and hence the active users are limited.

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