|
|
             |
DIVESTMENT The Race For IBP The first oil PSU sell-off will be keenly contested by both Indian and foreign majors. By Ranju Sarkar
For the past two months, IBP's ten-storey corporate headquarters in central Calcutta has seen more visitors than any other oil company. Even since the Vajpayee administration decided to put the state's share of 33.59 per cent in IBP up for sale, Indian and foreign suitors have been doing the rounds of this oldest-yet-smallest oil company. The fervid interest in IBP is easily explained. It's the only one of the three state-owned oil companies where the Government is inviting private ownership. With 1,527 outlets and a 9 per cent retail share in gasoline and diesel, IBP is a perfect vehicle for entry into the recently privatised oil sector. Not surprisingly, then, the list of suitors is a virtual who's-who of the oil world: Shell, Exxon-Mobil, BP, TotalElfFina, Kuwait Petroleum, Caltex, and Malaysia's Petronas; on the Indian side, there is Reliance and the three state-owned behemoths-Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation. Says Vikram Singh Mehta, CEO, Shell India: ''We are very supportive of the privatisation of IBP.'' For the oil transnationals, the Indian market has strategic importance. In other parts of the world, oil consumption is growing at just 2 to 3 per cent annually. But India's 100-million-tonnes-a-year market is growing at double the global rate. Starting from scratch would be time-consuming and prohibitively expensive. For instance, building a company of IBP's size could cost Rs 1,000 crore (minus the brand, goodwill, and dealer investments). And given the marketing profit margins of $1.33 per barrel, it could be as much as 15 years before the venture starts making money. Says a senior executive with a foreign oil major: ''IBP offers an opportunity to enter a 1-billion-barrel-a-year market at an incremental cost.'' Currently, expansion of outlets is controlled by the Sales Plan Entitlement Scheme, which pegs IBP's share at 3.8 per cent. Post decontrol in April, 2002, companies will be free to set up as many outlets as they want. But even with its limited reach, IBP has lots of pluses. For instance, in diesel, it has the highest throughput per pump. Besides, it directly controls 54 per cent of its outlets. Says S.C. Mathur, 55, CEO, IBP: ''IBP is an outstanding retailer with tremendous potential for growth.'' So how much is its 33 per cent stake going to cost? Estimates range wildly between Rs 185 crore and Rs 1,000 crore. Here's why: IBP's paid-up equity is a bare Rs 22.15 crore and its scrip is quoting at Rs 125 on the Bombay Stock Exchange. Going by the market cap of Rs 276.84 crore, one-third of the company should cost Rs 93 crore. However, the government is unlikely to sell it so cheap. Some analysts say the price per share could be substantially north of Rs 500, as a new entrant would likely be willing to pay a premium for the only entry vehicle available. Says an analyst with a Delhi-based foreign bank: ''I wouldn't be surprised if someone bids Rs 1,000 or above.'' Adds Vidhyadhar Ginde, analyst, HSBC Securities: ''The competition will be quite intense.'' Yet, it's unlikely that a strategic stake
would fetch fantastic numbers. Says Sashi K. Mukundan, V-P (India Business
Development, Gas & Power), BP: ''Ultimately, the acquisition has to
make economic sense.'' If the government decides to go ahead with the HPCL
and BPCL sell off in November, then the interest in IBP may fall
significantly. While that may be a loss for IBP, it will still be a gain
for the GoI. |
|
Issue Contents Write to us Subscriptions Syndication INDIA TODAY | INDIA TODAY PLUS | COMPUTERS TODAY © Living Media India Ltd |
 |
 |
