Bharat Petroleum to raise stake in Petronet CCK by 26%

Bharat Petroleum Corporation Limited (BPCL) will increase its stake in Petronet CCK by 26%. BPCL has accepted the offer to buy the stake from Petronet India Limited, which is winding up its operations. After the deal, BPCL stake in Petronet CCK will go up to 52%. Once the 26% stake in Petronet CCK is bought, BPCL will have the option of completely buying out Petronet CCK and merging it with itself. In Petronet CCK, the other investors are Kochi Refineries (23%), a BPCL subsidiary, State Bank of India (4.99%), IDFC (19.97%) and IL&FS (0.04%). PricewaterhouseCoopers has completed the valuation of Petronet CCK and the report has been submitted to BPCL. Petronet India’s board has approved the stake sale and an offer has been made to BPCL. The 26% stake is estimated at around Rs. 13.53 crores.

Petronet CCK operates a 292 km petroleum product pipeline from BPCL’s Kochi refinery to the company’s oil terminal at Karur in Tamil Nadu. The company was set up under the aegis of Petronet India to construct and operate the pipeline from Kochi to Karur, with a tap-off point at Coimbatore. BPCL already has an agreement with Petronet CCK for transporting refinery products from the Kochi refinery till 2012-13.

Petronet India is a financial holding company in which Indian Oil Corporation, Hindustan Petroleum and BPCL jointly hold 50% of the equity stake. Private sector companies Essar Oil, Reliance Petroleum and other investors hold the balance equity. Petronet India was to build pipelines on the common carrier principle. However, most of the companies that were to benefit from the projects did not agree on signing take-or-pay agreements with Petronet India. With the government granting companies the freedom to set up their own pipelines, the need for Petronet India diminished leading to its plans for liquidation.

Read the article in Business Standard.