₹46,000 Cr: Why Did the Government’s 53% Stake Sale in Bharat Petroleum Fail?

Synopsis: The Indian government’s planned sale of 52.98 percent of BPCL, valued at Rs. 46,200 crore, was the country’s largest disinvestment attempt. High costs, limited buyers, labor issues, and policy uncertainty delayed the deal, prompting the question: should the government have sold it?

India has often tried to sell its major public companies, but the plan to privatize Bharat Petroleum stood out as the country’s biggest disinvestment bet. The government aimed to unlock tens of thousands of crores in value through the sale, making it one of the most ambitious privatization moves in recent history. Yet, despite all the planning and attention, the deal never went through. So, what really happened in this bold attempt to sell a state-owned energy giant?

About Bharat Petroleum Corporation Limited 

Bharat Petroleum Corporation Limited (BPCL) traces its origins to Burmah Shell Refineries, established in 1952. Following the Government of India’s takeover of the Burmah Shell Group in 1976, it was renamed Bharat Refineries and later became Bharat Petroleum Corporation in 1977. BPCL is a fully integrated oil and gas company engaged in exploration and production of oil and natural gas, crude oil refining, and the marketing and distribution of petroleum products. The company also invests in renewable energy. 

BPCL manufactures products such as light and middle distillates and distributes them through an extensive network of retail outlets, dealers, and distributors, while supplying fuel to both domestic and international airlines. The shares of BPCL currently trade at Rs. 365.65 with a market capitalization of Rs. 1,58,636 crore.

What Was The Reason To Disinvest? 

Public sector units (PSUs) often face issues such as underutilization of resources, labor-related challenges, and inefficiencies in planning and management. Frequently, their pricing policies are not commercially viable, and they are burdened with social and political considerations that can hinder operational efficiency. Government control can limit the autonomy of PSUs, affecting their ability to function competitively.

A significant portion of public resources is tied up in PSUs that are not optimally utilized. These funds could be better allocated to priority areas such as healthcare, family welfare, and other social programs, making the opportunity cost of retaining these investments very high. In cases where non-strategic companies consume large amounts of public resources in attempts to revive unviable units, it is often in the public interest to divest and allow private players to take over.

Disinvestment transfers the commercial risks of running an industry to private entities, which helps protect the public exchequer. By moving these risks to interested and capable private players, industries are encouraged to operate efficiently and become self-reliant. Excessive government patronage can sometimes make industrial units inefficient, and privatization often helps them adopt market discipline, become more competitive, and use resources effectively.

Moreover, disinvestment can serve as a tool for wealth distribution by offering shares to small investors, as seen in the case of LIC of India Limited. A well-functioning capital market provides a more accurate valuation of government holdings. Increasing the number of publicly traded shares improves investor choice, provides early exit options, and can stimulate broader economic activity, ultimately boosting tax revenue and contributing to the nation’s prosperity.

Why The Deal Never Went Through? 

High Valuation and Financial Hurdles

According to a report, the proposed disinvestment of Bharat Petroleum Corporation Limited (BPCL) faced multiple hurdles, ultimately preventing the deal from materializing. The Government of India had planned to divest around 52.98 percent of its stake in the company. With BPCL’s market capitalization at approximately Rs. 82,500 crore in December 2021, the cost of acquiring such a large holding was estimated to be around Rs. 46,200 crore. Finding buyers with the financial capacity to invest in a deal of this scale proved extremely challenging, prompting potential bidders to look for strategic partners to share the investment burden.

Delays in Due Diligence and Limited Investor Interest

The process was further delayed as companies reportedly postponed due diligence to allow more time for identifying suitable partners. BPCL management received only a few basic queries since opening its records for scrutiny. By the end of 2021, just three companies had expressed genuine interest in the acquisition.

Notably, major players such as I Squared Capital and Apollo Global engaged with global energy firms and sovereign or pension funds to secure strategic backing, but these efforts did not materialize. According to a report, adding to the complexity, BPCL had pledged an investment of USD 2.2-2.4 billion in the Rovuma offshore field in Mozambique, increasing the cost and risk for potential buyers.

Challenges in Stake Sale Strategy

Experts argued that the government’s plan to sell the entire 52.98 percent stake at once was a key obstacle. A phased approach, offering 26 percent with management control initially and selling the remainder later, might have attracted more bidders and fetched a higher valuation. Another challenge was the uncertainty surrounding government policy. At the time, the government was focused on reducing crude oil imports and promoting renewable energy and electric vehicles, creating doubts about the future profitability of traditional oil and gas companies. BPCL itself had announced plans to invest Rs. 25,000 crore by 2040 to build 10 GW of clean energy capacity, signaling a shift in focus but also adding to the investment complexity.

Labor and External Factors

Labor issues also played a role, as trade unions and employee associations historically slowed disinvestment efforts in public sector undertakings, and BPCL was no exception. External factors, including global geopolitics and calls for net-zero carbon emissions, further discouraged investors. Additionally, BPCL management would have needed approval from its lenders, a process expected to take three to six months, which delayed financial bidding. Uncertainty in oil prices due to the pandemic further unsettled investors, who were reluctant to commit to a sector with unpredictable short-term demand.

Comments From The Petroleum Minister In 2024 

In 2024, India’s Oil and Petroleum Minister Hardeep Singh Puri announced that the state-run oil marketing company Bharat Petroleum Corporation Ltd (BPCL) would not be privatised. Posting on social media platform X (formerly Twitter) on July 5, he stated, “Decision made: India’s energy Maharatna BPCL is not for sale! BPCL is making almost as much profit in a single year as the price it was supposed to be sold for.”

During a media interaction, Puri noted that when he took office as petroleum minister, he was struck by the fact that buyers worldwide were interested in BPCL. “If everybody wants to buy BPCL, then surely we need to understand why they want to sell it,” he remarked. He further explained that the profit BPCL generated in the first three quarters of the financial year exceeded the proposed sale price, suggesting that proceeding with the disinvestment would have created a “first-class problem.”

In the first half of FY24, BPCL reported a cumulative net profit of Rs. 19,000 crore. Its net profit for the third quarter stood at Rs. 3,397.3 crore and improved sequentially to Rs. 4,789 crore in the fourth quarter. Revenue from operations in the final quarter remained largely flat at Rs. 1.32 lakh crore.

Financial Snapshot – FY25 

For the year ended 2025, Bharat Petroleum Corporation Limited reported sales of Rs. 440,272 crore, down 1.74 percent from Rs. 448,083 crore. Operating profit fell sharply from Rs. 44,082 crore to Rs. 25,401 crore, a decline of 42.38 percent, while operating profit margin decreased from 10 percent to 6 percent. 

Interest expenses dropped from Rs. 4,149 crore to Rs. 3,591 crore, down 13.44 percent. Profit before tax also reduced significantly from Rs. 36,194 crore to Rs. 18,182 crore, a fall of 49.79 percent, and net profit declined from Rs. 26,859 crore to Rs. 13,337 crore, down 50.37 percent.

Conclusion

The attempt to sell BPCL shows how complex privatizing a big public company can be. High costs, fewer buyers, policy uncertainty, and labor issues made the deal difficult. With BPCL earning strong profits and investing in clean energy, keeping it under government ownership was the safer and smarter choice.

-Manan Gangwar

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