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Monday,25-October-2021

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Bharat Petroleum divestment makes headway, more steps needed: Fitch

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Acknowledging progress in Bharat Petroleum’s divestment process, Fitch Ratings said that multiple steps are still needed.

Accordingly, BPCL has made headway on a key pre-condition to its divestment and other key milestones over the last six weeks, including the finalisation of terms to purchase Oman Oil Company’s 36.6 per cent stake in its Bina refinery in February 2021.

Besides, It also sold 5.8 per cent of its 7.3 per cent treasury shares and approved the sale of its 61.7 per cent stake in Numaligarh Refinery in March.

“The current book value of BPCL’s NRL investment is Rs 4.5 billion and the transaction will be subject to 20 per cent long-term capital gains tax on the consideration value less the indexed cost of the acquisition and improvement as ascertained by the company.”

“This results in net proceeds of Rs 130 billion for BPCL, less the long-term capital gains tax, although the timing of each transaction may vary. The impact on BPCL’s Standalone Credit Profile (SCP) will depend on the extent to which the proceeds are used to reduce debt or make dividend payments in the coming year.”

In March, BPCL had declared an interim dividend of Rs 11 billion.

“However, there is still little information about bidders, valuations or potential restrictions for the new owner in relation to employee protection, asset stripping and investment lock-in.

“Fitch is also monitoring the progress on interested parties receiving security clearances from the government, access to the data room, the start of the due diligence process, reserve-price disclosure by the government, the submission of financial bids by bidders and the solicitation of lenders’ consent should a winning bid be selected.

“Furthermore, BPCL’s bonds, which had USD2 billion outstanding as of end-2020, will need to be refinanced or the holders’ consent solicited, should the government accept a winning bid triggering the change of control clause.

“We believe the extent of refinancing or consent will depend on BPCL’s rating at the time. We do not expect the government to halt the sale should it be dissatisfied with the financial bids, given its budgeted disinvestment target and strongly articulated intent, but this could prolong the process.

“Fitch believes there is a need for further clarity on the future of subsidies paid to BPCL’s customers on the sale of liquified petroleum gas and kerosene as well as the freedom on pricing of petrol and diesel before the divestment can conclude.”

Traditionally, Centre has used oil marketing companies, including BPCL, to carry out its socio-political agenda, but private companies may be less inclined to bear such regulatory risk.

“The sale of the government’s entire shareholding in BPCL would lead to a reassessment of BPCL’s ratings, based on a reassessment of its SCP and the nature of the potential buyers, including the credit quality of any majority parent and Fitch’s assessment of the strength of linkages between the new parent and BPCL.”

Business

Equity indices trade lower; Sensex down by over 300 pts

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India’s key equity indices – S&P BSE Sensex and NSE Nifty50 – traded lower during Monday’s early-morning session.

At 10 a.m., the 30-scrip sensitive index traded at 60,504.75 points, down 316.87 points or 0.52 per cent.

The Sensex opened at 61,398.75 points from its previous close of 60,821.62 points.

Besides, the NSE Nifty50 traded at 17,989.40 points, lower by 125.50 points or 0.69 per cent.

It opened at 18,229.50 points from its previous close of 18,114.90 points.

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Business

Nissan, Porsche face action over false emissions information

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South Korea’s antitrust regulator has decided to order Nissan Motor, Porsche AG and their two Korean units to take corrective steps for falsified information over gas emissions of their diesel cars.

Nissan Motor, Nissan Korea, Porsche and Porsche Korea are alleged to have stated false information about gas emissions of their diesel vehicles imported for sale in South Korea, according to the Korea Fair Trade Commission (KFTC).

The KFTC also decided to impose a fine of 173 million won ($146,700) only on Nissan Korea, reports Yonhap news agency.

Illegal software installed in their cars caused gas emission reduction devices to not fully operate during normal driving conditions.

The practice meant that the cars did not meet permissible emission levels, but the automakers falsified such facts in signs attached to their cars, according to the commission.

In September, the regulator fined Audi-Volkswagen Korea and Stellantis Korea a combined 1.06 billion won for similar allegations over gas emissions.

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Fuel price hike paused after 5 days of increase

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The price hike of petrol and diesel paused on Monday after increasing for the last five days to reach their highest-ever levels across the country.

Accordingly, the pump price of petrol in Delhi remained at Rs 107.59 a litre, while diesel prices also stood at Sunday’s level of Rs 96.32 a litre, according to a price notification of state-owned fuel retailers.

In the financial capital Mumbai, where petrol prices increased to Rs 113.47 per litre and diesel to Rs 104.47 a litre, the highest among all metros, there was no further hike in the retail rates on Monday.

The fuel prices remained static on October 18 and 19, but increased for a fourth straight day by 35 paise per litre previously before again rising for five consecutive days between October 20 to 24. There was no change in rates on October 12 and 13.

Diesel prices have now increased on 24 out of the last 31 days, taking up its retail price by Rs 7.80 per litre in Delhi.

Due to the sharp hike, the fuel is now available at over Rs 100 a litre in several parts of the country.

This dubious distinction was earlier available to petrol that had crossed Rs 100 a litre mark across the country a few months earlier.

Petrol prices had maintained stability since September 5 but oil companies finally raised its pump prices last week.

The rates increased on 21 of the previous 27 days taking up the pump price of petrol by Rs 6.40 per litre.

Crude price has been on a surge rising over a three-year high level of over $86 a barrel as global demand remains firm while OPEC+ continues to move s lowly on increasing production.

Since September 5, wthe price of petrol and diesel in the international market is higher by around $9-10 per barrel as compared to average prices during August.

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