Apollo Global, I Squared Capital rivals Vedanta for buying a stake in BPCL

Vedanta, Apollo Global and I Squared Capital have responded to the Centre’s decision to lose its controlling stake in Bharat Petroleum Corporation (BPCL).

Vedanta currently holds a controlling stake in Cairn Oil & Gas, India’s largest private sector crude oil producer, and perhaps the most eager to diversify into the refining business.

The acquisition would remove the group’s risk from crude oil price volatility and would also make it future-proof with a dominant interest in the petrochemical sector.

But Vedanta promoter Anil Agarwal may not have a cakewalk as both Apollo Global and Squared Capital already have their fingers sunk deep into India’s energy ecosystem. Of the two, Apollo Global is clearly the much larger fish with $ 433 billion worth of assets under its management, significantly overshadowing I Squared Capital’s $ 13 billion in assets under management (AUM).

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“Apollo is a major player with a $ 77 billion private equity portfolio and a savvy energy investor. Among its most important investments, Apollo acquired LyondellBasell (Reliance Industries was also interested) in bankruptcy in 2009, which produced six times higher returns when it came out in 2014 for $ 12 billion. The Squared, while smaller at $ 13 billion AUM, is also a concentrated player in energy and utilities and has generated 30-40% compound annual growth rate returns on some investments in the industry, “they said. said Sabri Hazarika and Tanay Gabhawala of Emkay Global in a joint note.

Apollo Global also has significant control over the Welspun Corporation in India, where it manufactures oil and gas transportation pipes. This group has a history of aggressive acquisition of oil and gas industry assets that focus primarily on North America and the upstream value chain. So, like Vedanta, acquiring a refining and marketing major like BPCL makes sense.

Squared Capital recently garnered a lot of attention when it sold its stake in Amplus Energy Solutions to Malaysia’s state-owned oil and gas company Petronas. But the exit from the solar business practically coincided with the growing interest in India’s city gas distribution (CGD) projects through the acquisition of Think Gas. The company currently holds six licenses to operate CGD networks in 11 districts spread across Punjab, Madhya Pradesh, Bihar and Uttar Pradesh. I Squared Capital’s expression of interest (EoI) for BPCL also takes place through Think Gas.

The current valuation of BPCL is also very profitable. According to analysts, BPCL’s implied dividend income can comfortably meet the cost of financing. With BPCL’s current market capitalization, the acquisition of the central government’s stake can cost around Rupee 46,400 crore ($ 6-6.5 billion). By preparing for the competition, Vedanta has already initiated the process of raising $ 10 billion in the international market.

The government has yet to formally announce the names of the companies that have entered EoI for BPCL. Offers will be announced once the companies are selected.

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