BPCL's Amalgamation Of Subsidiaries, To Improve Synergies: Fitch

Privatisation-bound BPCL's plan to amalgamate its wholly-owned subsidiaries, Bharat Oman Refineries and Bharat Gas Resources, into the company will result in greater synergies, Fitch Ratings said on Monday.

Bharat Oman Refineries Ltd (BORL) owns and operates a 7.8 million tonne a year refinery at Binar in Madhya Pradesh. Bharat Petroleum Corporation Ltd (BPCL) operates oil refineries at Mumbai, and Kochi in Kerala. "All three of BPCL's refineries will be under one entity after the amalgamation, which we expect will improve efficiency in terms of crude procurement, inventory management and hedging mechanisms," Fitch said in a statement. Bharat Gas Resources Ltd (BGRL), formed in June 2018, holds BPCL's interests in the areas where it intends to build city-gas distribution (CGD) networks.

BGRL has interests in 13 areas at various stages of development, some of which would start contributing to earnings over the next four-to-five years. "We believe that after the amalgamation, BPCL will be able to optimise its business plan for retailing compressed natural gas at its CGD networks further in light of its 24 per cent share of the number of Indian fuel retail outlets and the potential to transform them into holistic energy stations catering to multiple types of fuel needs," it said.

Fitch said its assessment of BPCL's standalone credit profile fully consolidates BORL and BGRL, with credit metrics that have adequate headroom under the negative sensitivities. The amalgamation will have no rating impact, it said. "BPCL's rating is equalised with that of its largest shareholder, the Indian sovereign (BBB-/negative), based on Fitch's government-related entities rating criteria, due to the strong likelihood of government support. The negative outlook reflects that on the Indian sovereign," the statement added.

(PTI)