Global oil major Royal Dutch Shell will buy Bharat Petroleum Corp Ltd's (BPCL) 49 per cent stake in lubricant marketing firm Bharat Shell Ltd (BSL) for Rs 152.40 crore.
BPCL is exiting the joint venture company, floated in 1993 to market Shell branded lubricants in India, as it has developed a competing product.
“The Cabinet (at its meeting yesterday evening) gave its approval for the sale of 49 per cent equity stake of BPCL in BSL to Shell or its affiliate for a consideration of Rs 152.40 crore in cash,” Information and Broadcasting Minister P R Dasmunsi said on Friday.
Shell currently holds 51 per cent stake in BSL.
BSL incurred losses till financial year 2001-02 but after hiving off its loss-making LPG business, the company showed signs of turnaround and posted a net profit of Rs 12.12 crore in 2006-07.
Besides paying BPCL cash, Shell will also takeover the state-run firm's 49 per cent of BSL's debt amounting to Rs 31.2 crore as on March 31, 2006.
“The proposed sale will enable BPCL to withdraw from a joint venture company which has a competing business interest i.e. production and sale of branded lubricants in India,” he said.
“This would enable BPCL to concentrate on building and promotion of its own brand of lubricants resulting in improved brand image, higher growth, efficiency and profits.”
Official sources said BSL was formed to strengthen BPCL's position in the lubricant market by availing the opportunity for blending and marketing high performance speciality lubricants. BPCL did not have its own production of base oil at that time.
Both BPCL and Shell recognised the need for building their own brands independently in India and the state-run firm decided to exit BSL.
Sources said the board of Shell had on May 10 approved share purchase agreement with BPCL to acquire its 49 per cent stake in BSL at a price not exceeding Rs 177 crore.
After the acquisition, Shell would remove the 'Bharat' name in BSL. Shell currently has operational control of BSL.
Source: DNA India