Mining-to-oil conglomerate Vedanta is planning to raise $8 billion through a mix of debt and equity to secure funds for the acquisition of Bharat Petroleum Corp Ltd (BPCL).
Talks are currently on to appoint an "anchor bank" and "...discussions with JP Morgan are at an advanced stage," Mint reported, citing sources close to the matter.
DH could not independently verify this information.
Vedanta had before November 16 submitted an expression of interest in buying the government's 52.98 per cent stake in India's second largest fuel retailer. The goverment is selling its stake to raise a record Rs 2.1 lakh crore from disinvestment proceeds in 2020-21.
However, the worry is how Vedanta will raise finances for the deal on its own.
While BPCL dividends can cover the cost of debt of any acquisition, "the question we have is how would Vedanta Ltd secure funding, given the worries on leverage at Vedanta and the parent?," JP Morgan said in a report last month.
Moody's had on December 4 downgraded the corporate family rating of Vedanta Resources Limited to B2 from B1 citing its persistent weak liquidity and high refinancing needs.
In October, Vedanta Ltd's delisting went from almost-a-success to failure on account of a large quantity of unconfirmed orders. For a successful delisting, 1.34 billion shares had to be tendered, while the company received just 1.25 billion shares. The buyback, if succesful would have given the conglomerate easier access to funds needed for its BPCL bid.
Vedanta's interest in BPCL stems from its $8.67 billion acquisition of oil producer Cairn India nearly a decade back. The company produces oil from oilfields in Rajasthan which are used in refineries such as those operated by BPCL to turn them into petrol, diesel and other fuels.
Buying a 75 per cent stake in BPCL (52.98 per cent of government and 22 per cent through open offer) would cost Vedanta Rs 64,200-97,600 crore depending on the price (Rs 395 to 600 per share).
Acquisition of BPCL's 53% stake would will give the buyer ownership of around 15.33 per cent of India's oil refining capacity and 22 per cent of the fuel marketing share. BPCL has a standalone domestic sales volume of over 43.10 million tonnes and a market share of 22 per cent during FY20.
(With agency inputs)