Bharat Oman Refineries IPO: Bharat Oman IPO

Bharat Oman Refineries, which is a 50-50 joint partnership among the government of India owned Bharat Petroleum Corporation (BPCL) and Oman Oil Company (OMCL), is expecting to raise Rs 2,400 crore from the primary market, through the IPO book building process.The joint venture company has filed the red-herring prospectus with SEBI on Friday for the IPO.

The major portion of the money raised from this IPO will be utilized to finance the six million tonnes per annum refinery at Bina near Sagar district in Madhya Pradesh, that BPCL is planning to start. Initially, the BPCL company had plans to start this refinery more than a decade ago, but due to the delay of several years (or decades), the investment has run into losses and they need more money to be pumped in to start the refinery. The cost has increased by more than double due to the delay. So who pays for the delay and mismanagement of the company? The answer is simple, let the investors pay for it. The primary IPO market is there to fund for the mistakes of the company management. If this is the situation and track-record of the past, God knows what the company management will do with the money raised in future. They can give several reasons – government policy, land acquisition, proposals, financing, etc. etc.. But wont these be problematic for the future as well?

Anyways, after the IPO, the company’s debt equity ratio will stand at 1.6:1. The remaining Rs 1,600 crore will come from BPCL, OMCL and the Madhya Pradesh government as their equity contribution.

The present status of the project at Bina is that almost 50% of it is complete. The work is expected to start in full swing in the 2010.
The refinery is designed to have a crude oil processing capacity of 6-million metric tonnes per annum and a higher complexity factor of 9.1, as measured by using the Nelson Complexity Index. The project also includes a crude oil importing and storage system in Vadinar, Gujarat, consisting of a single-point mooring facility that can receive crude oil shipments from very large crude carriers of up to 320,000 dead weight tonnage and a crude oil terminal with a capacity of 480,000 cubic meters.

Oil is riding really high. With the crude oil prices touching a high of $112 a barrel in the recent past, it is expected that the company will be able to sustain the return on investments. Let’s see how this IPO figures out. Details are awaited for the price band and listing date of Bharat Oman Refineries IPO

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