InvestorQ : How is Vedanta planning to fund the acquisition of BPCL, if its bid gets approved in the final stage?
Mitali Bhutta made post

How is Vedanta planning to fund the acquisition of BPCL, if its bid gets approved in the final stage?

Answer
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3 months ago
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Vedanta is one of the front runners for the government stake of 52.98% in BPCL. Towards this end, Vedanta will raise $8 billion through a mix of debt and equity to fund the acquisition of the 52.98% stake of the Indian government in BPCL. Vedanta has already initiated talks with a consortium of banks to tie up the funds.

The government stake, at current valuations in the market, would work out to around Rs.45,000 crore or around $6 billion. However, as per the extant SEBI regulations, the final successful bidder for the 52.98% stake in BPCL will have to also make a similar open offer to buy shares from another 22% shareholders to take their stake to 75%.

That is expected to cost a little over $8 billion. The stake sale in BPCL is important from a macro point of view because it is part of India’s aggressive divestment program; supposed to collect Rs.105,000 crore in fiscal 2021; excluding the LIC IPO. Including the LIC IPO, the total divestment collection will be to the tune of Rs.210,000 crore.

There is a strong reason why Vedanta is interested in BPCL. Vedanta is already present in oil extraction and drilling business through its stake in BPCL will be a forward integration for Vedanta’s oil extraction business. By combining refining and marketing of oil also to its portfolio, Vedanta will be able to manage its oil risk better.

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