Fich says BPCL privatization can be delayed for a number of reasons

Fitch’s ratings on Monday said unequal pricing in the bidding process and complexity of the process could lead to the privatization of India’s second-largest retailer Petroleum Corporation Limited (BPCL).

Positively confirming the BPCL’s status on BBB, Fitch said the government’s potential to reduce the company’s potential was seen as a threat.

“Bidders are taking the necessary precautions, but this can lead to delays, including price estimates on the merger and process complexity.

“We believe that further COVID-19 waves and the risks posed by the global oil and gas companies’ energy transfer will lead to further distrust in the timing and cost of purchases in the sector,” he said.

He said the rating agency will review the ratings after significant improvements.

The government received three declarations of interest (EIS), including one from Vedanta, led by billionaire Anil Agarwal.

Financial tenders have yet to be announced.

Fich is expected to increase BPCL trading volume from FY22 to 41 million tons (MTA) from FY22 to 41 million tons, still 6 percent below FY20 level.

This is the second wave of epidemics in 1QFY22, reflecting the impact on India’s petroleum demand and the dangers of further storms.

“We expect the demand to be lower than FY21 in FY22, as business and community behavior is improved, it supports activities and the immunization program can prevent the recurrence of serious diseases,” he said.

BPCL gross margins (GRM) are expected to grow from GRM $ 1.9 to FY22 $ 3.5 to $ 3.5 during the fiscal year.

“We expect OMCs, including BPCL, to maintain a consistent base market margin in FY22, including price increases, to bring their filters in line with new emissions laws. However, MMA The reduction in fuel prices has not completely been passed on to consumers. ”

Profitability can be detrimental if crude oil prices continue to rise and face a weak refinery environment.

We believe that the reduction of the MM can affect the government’s plan, limit any serious cuts, and the government can reduce taxes in such cases. We believe that the economic recovery since the outbreak of May 2020 will support the government’s capacity. To reduce taxes, if he has to choose, ”he said.

Fitch assessed the status, ownership and control of the BPCL as “sovereign”.

The state appoints the board directly, owning 52.98 percent of the company.

“We consider the government support record for the BPCL to be” strong, “he said.

“BPCL has received substantial support from the state in the form of parliamentary subsidies to assist in the recovery of products sold below market value. It has also received indirect government support for overseas purchases.”

Fitch described the BPCL’s “socio-political implications” as “very strong.”

As the BPC is the country’s largest oil refinery and oil-trading company (OMC) and plays a key role in importing crude oil to meet India’s energy needs, it is hampering a default economic activity and severely damaging India’s energy security. “he said.

(Only the title and picture of this report may have been redesigned by Business Standard staff, and the rest of the content is automatically generated from integrated feeds.)

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