India: Global headwinds to hit BPCL, Air India sale

Photo: Daniel Eledut

The outbreak of Covid-19 and the collapse in global crude oil price may have dealt a twin blow to the government’s plans to privatize Air India (AI) and Bharat Petroleum Corp. Ltd (BPCL).

The spread of the virus to more than 100 countries and leading to the death of more than 4,300 people has hit the travel and hospitality industry the hardest, with countries imposing both inward and outward travel bans. Brent crude was down almost 3% to $36 per barrel on Wednesday after Saudi Arabia and the United Arab Emirates announced plans to boost production capacity.

Present market conditions do not favour the planned sell-off of BPCL and Air India, said Madan Sabnavis, chief economist at Care Ratings. Sabnavis said he expects the sale to be held in abeyance for the time being. “The aviation industry is down and one is not sure how it will fare or when it will recover with the entire travel and tourism industry being affected. Therefore, the Air india sale looks weak. For BPCL, Saudi Arabia has added new dimension to the warfare, which will make oil companies less competitive and hence the sale of an oil company may not be appropriate today. It is expected that a bidder could be from outside, which now makes the valuation tricky given that oil prices have crashed and will be volatile,” he said.

“We have just released the expressions of interest (EoIs) for Air India and BPCL. Though current market conditions do not appear favourable, an investor will look at opportunities in the medium term. As the transactions have to be completed over the next one year, we have enough time to recalibrate bids if initial interest shown by investors fall below expectation,” the official said.

The Covid-19 outbreak will give the Indian government more time to prepare for the sale, said Lewis Burroughs, head of aviation, India, at global consulting services company ICF. “In terms of market appetite, investors could be cautious during the next two quarters or so. However, with the government keen to privatize the airline, the divestment of Air India should happen in the future,” he said. Dipam has extended the deadline for release of response to queries on preliminary information memorandum from 25 February to 16 March. The last date for submission of EoIs is also likely to be extended from the current 17 March, civil aviation ministry officials said.

This article was first published on livemint.com.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.