Friday, September 15, 2017

BPCL joins the big league of Maharatna PSUs; what benefits will the PSU get?

BPCL CMD D Rajkumar
THE second largest state-owned refiner Bharat Petroleum Corporation (BPCL) has got the coveted Maharatna status. The government of India has conferred Bharat Petroleum Corporation Limited (BPCL) with Maharatna Status. Accordingly, BPCL is empowered to exercise the powers of a Maharatna company as governed by relevant guidelines issued...
by Department of Public Enterprises. Thus, the PSU has joined the select group of seven Central Public Sector Enterprises (CPSEs). BPCL is empowered to exercise the powers of a Maharatna company as governed by relevant guidelines issued by Department of Public Enterprises, the company said in a BSE filing.
For the quarter ended June 30, 2017, the company reported a net sales of Rs 57125.80 crore, up 21.70 per cent, against Rs 46938.67 crore in the corresponding quarter last year. Reported net profit of the company slipped 71.59 per cent YoY to Rs 744.56 crore during the quarter under review.
With reduced debts too, BPCL plans to invest Rs 1 lakh crore in the next five years.
A PSU needs average three years' annual net profit in excess of Rs 5,000 crore, average annual net worth of Rs 15,000 crore for three years and average annual turnover of Rs 25,000 crore for three years to get the Maharatna status.
With Maharatna tag, BPCL will race ahead of its peer HPCL in the race as the status will help BPCL to take investment decisions of up to Rs 5,000 crore, or be free to decide on investments of up to 15% of its net worth in a project without seeking the government's permission.
A major share of the total investments, or Rs 40,000 crore, is proposed to be used to expand BPCL's refining capacity to 55 million tonnes per annum (mtpa) from 30 mtpa now. The company proposes to scale up its Bina refining capacity to 15 mtpa in phases from 6 mtpa now, Kochi refining capacity to 17 mtpa, Mumbai refining capacity to 14 mtpa and Numaligarh refining capacity to 9 mtpa.
Another Rs 25,000 crore is proposed to be invested in the upstream assets, primarily in its discovered oil field in Brazil and gas block in Mozambique with reserves of 75 trillion cubic feet (tcf) of gas reserves. Rest Rs 35,000 crore will be spent to scale up its marketing infrastructure, city gas distribution business and setting up a global presence in the petroleum product marketing space.
The oil marketing company is at present a Navratna firm. The decision to elevate BPCL to Maharatna status was taken by a panel headed by the Cabinet secretary and an announcement to this effect is likely soon.
Maharatna and Navaratna state-owned units operate in strategic fields such as coal, petroleum, steel, heavy engineering, power supply, telecommunications and transportation services.Under government rules, a firm is eligible for Maharatna status if it is already a listed Navratna firm, has an average turnover, net worth and annual net profit after tax of at least Rs 25,000 crore, Rs 15,000 crore and Rs 5,000 crore, respectively, in the last three years. Moreover, the company should have significant global operations.After becoming a Maharatna firm, the board of BPCL will get enhanced powers which will help in expansion of operations, both in India and abroad.
The PSU will invest Rs1.08 trillion over the next five years to expand operations across its business segments, chairman and managing director D. Rajkumar told reporters on September 12.
The PSU is bullish on the petrochemicals segment and plans to invest around Rs45,000 crore in the business over five years.
“At present, 1% of BPCL’s throughput is getting converted into petrochemicals. By 2022-23, we are targeting a throughput of 10-15%,” said Rajkumar. This additional investment will translate into higher profitability, he added.
The Maharatna PSU will now be able to raise cheaper funds and make investments of up to Rs5,000 crore in a single project going forward.
The CMD told a national financial daily that now the PSU will have enhanced capacity to invest up to Rs 5,000 crore in a project. With the ‘Maharatana’ status, we can look at larger projects and expand our value chain. We would be looking seriously at expanding our petrochemicals business and investing in upstream to acquire some assets.
“We will take up large projects but the focus would be on profitability. For instance, average sale at BPCL retail outlets is higher than the industry average, and we would want to continue that way. In petrochemicals too, we would look at high-margin products that can boost profits,” he said.
The PSU now could look to add new roles at board level with business development being one of them, given the thrust the company is laying on expanding its global business.
“With the Maharatna status conferred upon us, the government has opened up the leadership pipeline for the company. The kind of global expansion the company is looking to have, there is need to have a business development official at the board level,” Rajkumar told a daily. Currently, BPCL's competitor Indian Oil Corporation (IOC) has a planning and business development official on its board.
“Apart from business development, requirement of a board member for the research & development (R&D) segment could also arise but this addition could be made only as and when required. As of now, the need for a planning and business development role at board level looks important,” he said.
BPCL is a Fortune 500, leading Navratna PSU in the exciting and dynamic energy sector engaged in Refining, Marketing and Distribution of Petroleum products and in exploration of Oil/Gas. BPCL group achieved a gross revenue of Rs. 2, 58,731.09 cr from Operations for the year 2014-15.
Currently, there are seven Maharatna PSUs. They include: Bharat Heavy Electricals Limited (BHEL), Coal India Limited (CIL), GAIL (India) Limited, Indian Oil Corporation Limited (IOCL), NTPC Limited, Oil & Natural Gas Corporation Limited (ONGC) and Steel Authority of India Limited (SAIL).
The CPSEs fulfilling the following criteria are eligible to be considered for grant of Maharatna status.
(i) Having Navratna status.
(ii) Listed on Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
(iii) Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
(iv) Average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
(v) Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
(vi) Should have significant global presence/international operations.

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