Mumbai, June 23: The ministry of petroleum and natural gas has shortlised Indian Oil as the ideal buyer for IBP, the stand-alone marketing PSU. It is also working on a plan which will involve selling the Government's entire 59.58 per cent stake in IBP to IOC along with the marketeer's network of over 1,500 retail outlets.
According to top ministry sources, this arrangement has been found to be the best bet for IBP. It will effectively arrest any move by two other oil navratnas--Hindustan Petroleum Corporation and Bharat Petroleum Corporation --to acquire IBP. Reliance Petroleum was as keen and was, at one point, tipped to be the strongest contender.
The move by the ministry has taken observers by surprise as it was widely thought that the process of selling the Centre's holding in IBP would be through a process of open bidding. Multinational oil majors have been keen on getting a foothold in the lucrative areas of marketing and would have logically bid for IBP.
The equations in the retail segment will change once IOC formally acquires IBP. The Fortune 500 company will then emerge with a strong market share of 60 per cent while BPCL and HPCL will be way behind with barely 20-22 per cent each. Private refining companies like RPL and Mangalore Refinery and Petrochemicals will need time to build a strong marketing base as this will involve a laborious procedure of wooing existing dealers to change loyalties or go in for commissioning new outlets.
RPL would have benefited enormously with IBP as there would have been a ready retail network for the products of its 27 million tonne refinery in Jamnagar. Nearly 50 per cent of IBP's product outlets are located in the northern region which is is among the largest consumers of petro-products.The government's stake in IBP will come down considerably once the OIDB (Oil Industry Development Board) converts part of its loan component of over Rs 600 crore into equity. OIDB will then become the largest shareholder in IBP with a stake of around 55 per cent with the balance taken up by the government, public and financial institutions.
Contrary to common perception, OIDB is a statutory body and not an arm of the government. It has the status of any financial institution like the IDBI or ICICI. An OIDB stake in IBP would not, therefore, translate as a quasi-government holding.
For the last two years, IBP has been going through hard times with the Centre busy trying to find a solution to the problem of stand-alone refining and marketing companies. This delay has compelled IBP to put off its public issue which would have reduced government holding in the company from 59 per cent to 51 per cent. IBP subsequently sought shareholder approval to go in for a Rs 382 crore rights issue which would have logically given the Centre an exit option. This again had to be put on hold because talks began doing the rounds that the company would be merged with BPCL as part of the Sengupta committee's recommendations.
IBP protested and said the best bet was to go in for a strategic alliance with the three sole refiners--Bongaigaon Refinery and Petrochemicals, Chennai Petroleum Corporation and Kochi Refineries--but this suggestion was turned down by the petroleum ministry.
While gearing up for a sale to a stronger ally, IBP has kicked off work on spinning off its chemicals business, which has been facing the strain of high labour costs and intense competition, into a separate company. The chemicals business is one the three key groups within IBP, the other two being petroleum and engineering.
Efforts on the recast exercise in chemicals will begin once the petroleum ministry gives its go-ahead to a 90 day voluntary retirement scheme (VRS) which will see a significant reduction in staff. IBP has also shifted part of its manufacturing facilities for explosives from Manesar in Haryana to Korba, Madhya Pradesh.
As part of its endeavour to focus on marketing, IBP has written to the ministry that it wants a quick exit from the Rs 2,600 crore Numaligarh refinery, Assam, where it has a 19 per cent stake valued at Rs 173 crore. IBP has stated that this portion could be sold to partner BPCL which holds 32 per cent in the project and has already indicated its interest in hiking this further to 51 per cent.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.