India mulls kicking off to seek equity in three big refineries

The Indian government mulls to kick off a multi-billion-dollar process seeking equity in its three big state refiners in return for funding towards the firms’ energy transition projects.

The Oil Ministry asked state-controlled Indian Oil Corp (IOC.NS) and Bharat Petroleum Corp Ltd (BPCL) (BPCL.NS) to launch rights issues, and asked Hindustan Petroleum Corp Ltd (HPCL) (HPCL.NS) to make a preferential share allotment to the government.

BPCL informed India’s stock exchanges of a board meeting planned for June 28 to consider various possibilities for capital injection, including a potential rights issue, to help achieve its energy transition, net zero and energy security objectives.

In the 2023/24 federal budget unveiled in February, Finance Minister Nirmala Sitharaman announced that the government would provide 300 billion rupees ($3.66 billion) in equity to help state oil refiners move towards cleaner energy.

Combined, the three refiners aim to invest 3.5-4 trillion rupees to reach their net zero-emissions goals by 2040.

Indian Oil, the country’s top refiner, will soon seek board approval to raise its authorized share capital ahead of the planned rights issue. Indian Oil and BPCL are majority owned by the federal government.

The government’s seeking of a preferential allotment of shares from HPCL follows the 2018 sale of the government’s 51.1% stake to state-run Oil and Natural Gas Corp (ONGC.NS).

According to the sources, the federal government wants to complete the process by all three refiners by October. In addition to share issues, the three companies also plan to raise debt to meet their 2040 commitments.