BPCL privatisation: Moody's warns of steep downgrade

Mumbai: The international Credit Rating Agency Moody's on Thursday warned of downgrading Bharat Petroleum Corporation (BPCL) to Ba1, if the government goes ahead with privatisation by selling its stake to private entity.

Currently, being a state-owned enterprise, BPCL has a BBB- rating which is on par with sovereign rating. Ba1 rating will be equal to its current baseline credit assessment.

Last year, government had sold its entire stake i HPCL to state-owned ONGC but the oil marketeer still enjoys BBB- rating considering ONGC ownership by the government.

Moody's said the proposed stake sale in BPCL would remove the company's links and prompt bond redemption, a credit negative.

On 30 September, the group of secretaries on disinvestment gave its approval for to sell government's entire 53.29% stake in BPCL, which is likely to be completed by March 31, next year.

The agency noted that BPCL's credit ratings will depend on whether the buyer is another state-owned company or a non-state-owned company, if the stake sale goes ahead.

The stake sale will require further approvals from the cabinet of ministers and both houses of the Parliament.

"BPCL's Baa2 ratings incorporate our expectation of the high likelihood of extraordinary support from the government, which results in two notches of uplift in the ratings," Moody's said.

The agency emphasised that its support assessment for BPCL reflects the company's vital role in India's oil and gas sector as the second-largest state-owned refining and marketing company in the country, accounting for 15% of total installed refining capacity.

In addition, the company distributes 21% of petroleum products consumed in the country by volume as of March this year.

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