Vedanta group to raise $8 billion for BPCL acquisition
The Vedanta group is planning to raise about $8 billion through a mix of debt and equity for the acquisition of state-run Bharat Petroleum Corp. Ltd. (BPCL), reports said on Wednesday. The group, led by billionaire Anil Agarwal, has already started talks with banks and discussions have reached an "advanced stage" with the American lender JP Morgan. Here are more details.
'Talks currently on to appoint anchor bank'
Citing two people directly aware of the group's talks with investors and banks, Mint reported that the mining-to-oil conglomerate Vedanta Resources Plc is planning to raise $8 billion for the acquisition of BPCL. One of the two people said, "The talks are currently on to appoint an anchor bank for the purpose and discussions with JP Morgan are at an advanced stage."
Vedanta had earlier shown preliminary interest in buying government's stake
Earlier in November, the Vedanta group had put in a preliminary expression of interest (EoI) for buying the government's 53% stake in BPCL. The sale is expected to fetch the government roughly Rs. 45,000 crore. It will help offset the revenue losses caused by COVID-related disruptions and also secure funding for additional spending to boost India's ailing economy.
EoI aimed to evaluate potential synergies with Vedanta's oil-gas business
In November, the group had said, "Vedanta's EoI for BPCL is to evaluate potential synergies with our existing oil and gas business (formerly known as Cairn India). The EoI is at a preliminary stage and exploratory in nature."
Analysts question group's ability to raise funding on its own
In a November report, JP Morgan had asked "How would Vedanta Ltd. (an Indian unit of Vedanta Resources) secure funding, given the worries on leverage at Vedanta and the parent." A 75% stake in BPCL—53% from the government and 22% through an open offer—would cost Vedanta Rs. 64,200-97,600 crore depending on the price (Rs. 395-600 per share), the report had said.
'Vedanta keen to onboard equity partners for joint BPCL acquisition'
The second source quoted by Mint said, "Vedanta is aware of the challenges it faces in raising funds and is, therefore, keen to onboard equity partner(s) to jointly acquire BPCL." They said, "It has also initiated discussions with several global private equity funds to jointly bid." However, the names of the private equity funds could not be determined immediately.
Questions raised about Vedanta's ability to repay bondholders
Investors have raised questions about the Vedanta group's ability to successfully repay bondholders. The group remains strained ever since its unsuccessful attempt to delist Indian unit Vedanta Ltd. in October. Recently, Moody's Investors Service had lowered Vedanta Resources' credit rating into junk territory.
