Vedanta Ltd.’s possible acquisition of state-run Bharat Petroleum Corporation Ltd (BPCL) will not be done using its parent company’s fund. A day after the mining firm announced its plan to set up specific funds with strategic investors for the deal, the company’s founder and chairman Anil Agarwal has emphasized that Vedanta Resources’ funds will not be utilized for the acquisition. “On BPCL, I have always said Vedanta won’t fund the deal if it happens. Vedanta follows a disciplined capital allocation policy,” Agarwal told CNBC TV18 today.
Adding that the company did not feel the need to demerge as it was better to ‘have one strong company,’ Agarwal affirmed that there is no plan to delist Vedanta. “We are comfortable with $12.5-billion debt, which is 1.2-1.3x debt-equity ratio,” the billionaire was quoted as saying.
Agarwal also spoke about plans to increase the stake in Hindustan Zinc and said that Vedanta was willing to acquire an additional stake of up to 5 per cent if the government plans to sell it. “There will be enough demand in the market for the rest of the stake in Hindustan Zinc. The option of buying a full residual stake in Hindustan Zinc will be dependent on valuations and regulatory nod,” he said.
Earlier on February 8, Vedanta in a statement said that if the deal with BPCL goes through, the company may undertake the management of the acquired business, through appropriate profit-sharing arrangements or on a management fee model.
The same day, Vedanta also informed market regulators that it had dismissed the proposal to rejig the corporate structure after completing its reorganisation review.
The government is seeking to privatise BPCL by selling its 53 per cent stake at a valuation of over $6 billion, to private entities
According to CNBC TV18, the finance ministry is currently in ‘wait and watch mode’ regarding this privatisation deal after the consortia that submitted EoI (expression of interest) expressed reservations. Five of the six EoIs that were previously submitted for BPCL acquisition have been withdrawn and Vedant currently is the lone bidder.
After a cold response from the market, the government is said to be reconsidering the decision to privatise the state-run oil company and has not asked for any fresh EoIs, even though the option exists.
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