INSUBCONTINENT EXCLUSIVE:
Even as the Union government has approved the strategic disinvestment of BPCL, investors have to contend with the complex maze of cross
holdings of state-owned energy companies
This has a bearing on dividend income and the computation of fair value
and 28 per cent last fiscal
The Street typically discounts 20-30 per cent as holding company discount to the listed investment to compute fair value.
OMC stakes in
other energy companies are in the range of 2 per cent to 22 per cent
BPCL holds 12.5 per cent in Petronet LNG, 22.5 per cent in Indraprastha Gas and 2.47 per cent in Oil India
In case BPCL chooses to offload them, the result would be an excess supply of these stocks, depressing prices.
Among unlisted investments,
BPCL holds 61.6 per cent in Numaligarh Refinery (NRL)
One factor to watch out before the strategic sale is how BPCL would offload its stake in NRL
It had a book value of ?5551 crore in FY19
State-owned refiners are currently trading at 0.9-2.87 times book value.
Analysts believe that offloading listed investments could make
sense for strategic investors to reduce the risk of any future government intervention
Since a listed investment is as good as cash equivalent, it can be sold before disinvestment and the proceeds given as one-time special
