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BPCL may buy an entire stake of OQ in its refinery joint venture

By IndianMandarins- 30 Jul 2020
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Disinvestment-bound BPCL likely to buy out the entire stake of OQ, the erstwhile Oman Oil Company (OOC), in its refinery joint venture in Madhya Pradesh, the Bharat Oman Refineries Ltd (BORL). The BORL became a subsidiary of BPCL in March this year and the next step now is to convert it into a 100 percent subsidiary before the government stake in the company is sold to a strategic partner.

BPCL and OQ were 50:26 joint venture partners in the BORL till March when BPCL converted 13 percent of its earlier investment made in compulsorily convertible debentures and share warrants of the BORL or Bina refinery. This made the BORL a subsidiary of BPCL as its stake in the refinery increased to 63 percent from 50 percent earlier.

The investment in convertible debenture was equivalent to 24 percent additional equity stake in the BORL. As per information, If BPCL converts the remaining 11 percent of convertible debentures to equity, its holding will increase to 74 percent given that OQ has not shown interest in increasing stake in the BORL by putting in additional equity. This will leave 26 percent equity with OQ that the company will negotiate to buy to complete 100 percent acquisition of Bina Refinery.

The refinery has expanded its capacity from 6 million tonnes (mt) per annum to 15 million tonnes in two phases. While the then OOC had agreed to provide funds in the first phase of expansion to 7.8 mt with an investment of Rs 3,500 crore, it was unwilling to participate in the second phase that needed another Rs 30,000 crore over next five to six years.

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