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BPCL expects to complete refinery acquisitions by March

Indian state-run refiner Bharat Petroleum Corporation Ltd said on Tuesday that it hopes to complete the acquisition of two smaller state refineries by March, the funding of which will be through loans and its own funds.

The two purchases in Kochi Refineries Ltd and Numaligarh Refineries Ltd are expected to cost a combined Rs 8 billion ($172 million), analysts said.

With the acquisitions, BPCL's annual 9 million tonnes per year output capacity will more than double to 19.5 million tonnes.

"We are awaiting the government's instructions. We expect the deals to be completed by March," BPCL chairman U Sundararajan said.

"We will go in for borrowings at this stage as our debt-equity ratio is only 0.7 to 1.0," Sundararajan said. He added that BPCL had decided against an equity offering. "We have decided against going in for a public issue as earlier planned in the January-March quarter because of good cash flows and the state of the markets," he said.

The government decided last year that BPCL would buy its entire 55-percent stake in KRL and the 19 per cent stake held by IBP Co, a state-run marketing firm, in NRL.

With the acquisitions BPCL will be the majority shareholder in both companies.

"It's a big jump in refining capacities that is very timely, given that deregulation of oil product marketing is just a year away," said Shyam Bhat, fund manager at Tata Mutual Fund.

"If the acquisition price is right, I see it as benefiting BPCL shares," he said. The government owns around 66 percent of BPCL.

India plans to allow private players into the marketing of petroleum products by 2002. Currently, only Indian Oil Corporation, BPCL, Hindustan Petroleum Corporation IBP are allowed to sell products to the consumer.

Sundararajan said BPCL would go ahead with plans to build a Rs 70 billion refinery with production capacity of 120,000 barrels per day (six million tonnes per year) at Bina.

"We are waiting for the Oman Oil Corporation to tell us if they are interested in equity, and should know by the end of January," he said.

BPCL has also decided to bid for the 33.6 per cent stake the government wants to sell in fuel retailer IBP, he said.

BPCL, India's second largest oil marketing firm after IOC with a 21 per cent market share, plans to invest Rs 2 billion to set up 400 outlets before deregulation.

"BPCL has launched 20 stores in Bombay, Delhi and Calcutta that offer services like cash vending machines, photo shops and restaurants, and plans 300 more by 2002 in 23 cities," he said.

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