Merger times
New Delhi   30-Mar-2009
The long pending merger between India's largest oil marketing company IndianOil and its Assam based subsidiary Bongaigaon Refinery and Petrochemicals (BRPL) consummated on 25 March 2009 after the Ministry of Corporate Affairs, which oversees the mergers between public sector companies, tendered its consent. Both the boards had approved the merger in November 2006, which was followed subsequently by approvals from shareholders as well as other regulatory authorities. The record date for the share swap is yet to be announced, the shareholders and creditors of both the companies had long ago conceded their approval for the merger with a swap ratio of 4:37 (four shares of IndianOil for every 37 shares of BRPL). Prior to the merger IndianOil held 74.5% stake in BRPL, which is IndianOil's second largest subsidiary in terms of net sales. As a result, IndianOil will have to issue 55.1 lakh equity shares for the outstanding BRPL shares, which amounts to equity dilution of less than 0.5%. In the trailing 12-month period, both the companies have incurred net losses and hence if we compare the FY08 net profit numbers, the merger is slightly EPS accretive for IndianOil investors. IndianOil's petroleum refining capacity, which already stands at 44 million tonnes per annum (mtpa), will now stand 4,5% higher at 46 mtpa. BRPL's rated capacity is 2,35 mtpa, however, it is operating below 85% utilisation due to lack of availability of crude oil. BRPL had set upfacilitiesto produce petrochemicals such as di-methyl terephthalate (DMT) and polyester staple fibre (PSF) between 1985-88, However, these facilities were closed in November 2005 due to lack of commercial viability. The refinery itself suffers from lack of sufficient crude oil supply due to dwindling crude production in the Northeastern region. However, the refinery being located northeast enjoys 50% excise duty waiver. IndianOil already has another refinery in this region at Digboi. Through this merger, IndianOil will also save on sales tax, which it had to pay earlier on marketing of BRPL's refined products.