Oman Oil carries out due diligence on Bina refinery

Vol 11, PW 11 (04 Oct 07) Midstream & Downstream

Middle Eastern investment company Oman Oil is carrying out due diligence with a view to possibly increasing its stake in Bharat Oman Refineries Ltd (BORL), its longstanding joint venture with Bharat Petroleum set up to construct the delayed 6m t/y Greenfield refinery at Bina in central Madhya Pradesh.

“Oman Oil has appointed an external consultant to carry out due diligence,â€‌ says a BORL source. “This consultant has not had a meeting so far with us, but Oman Oil has all information on the project because it has a director on the board (of Bharat Oman Refineries Ltd).

â€‌ BORL fully expects Oman Oil to complete the due diligence exercise in mid-November this year. By this time, Bharat Oman hopes to have appointed a merchant banker to suggest the appropriate equity structure for the company, how much equity should be offered to retail investors through an Initial Public Offering and at what price.

Bharat Oman wants to complete this by March next year so it can decide whether to include another strategic partner or float its shares or both. BPCL’s agreement with Oman Oil is that they will hold 26% each (52% total) in BORL, with the balance 48% held by financial institutions and investors.

However, the equity of the company is not yet fully subscribed and what has been called up so far is only Rs152cr, in which BPCL and Oman Oil each have put in Rs76cr – 50% each. When it was set up, Oman Oil had capped its equity contribution in BORL to Rs76cr, citing delays in project implementation.

However, now the equity is being restructured with offers to another potential strategic partner and the likelihood of an IPO. After this restructuring, the equity will be 52% with BPCL and Oman Oil and the rest with outsiders as originally planned.

However, if Oman Oil decides not to increase its equity contribution beyond Rs76cr, it will end up holding 3% of the final equity of BORL. In such a situation, BPCL has government approvals to raise its equity to 49%.