Public sector firms are not just candidates for a stake sale by the government looking to raise money through disinvestment. The state owned companies are also eyeing overseas assets in times of global recession. After PSU banking giant SBI exploring opportunities abroad, state-owned oil marketing firm Hindustan Petroleum Corp (HPCL) is now believed to have initiated a move to acquire most of the oil refining and distribution assets of Royal Dutch Shell Group in New Zealand.
HPCL has appointed PricewaterhouseCoopers as a consultant for a potential deal last week according to this report by Dow Jones Newswires.
The plan to look at the acquisition is apparently in initial stages. Shell New Zealand Ltd had earlier in the month of May appointed UBS to find a buyer for its entire downstream assets (excluding its 36% stake in construction and roadwork firm Fulton Hogan). The assets on the block include Shell's 230 retail fuel stations, a marine business, commercial fuel and aviation operations, 17% stake in New Zealand Refining Co and a 25% stake in Loyalty NZ. Shell's distribution network includes terminal facilities throughout New Zealand.
The move from HPCL is interesting as it comes at a time when the Indian government is believed to be working to deregulate fuel prices. Currently the government determines the price of key fuel oil such as petrol, diesel and kerosene despite the country deregulating prices few years back.
So, if global crude prices shoot up (as it did last year) the fuel retailing companies tend to make losses as the government tries to cushion the impact of the price rise in the domestic economy by fixing a maximum price at which fuel is sold in the country.
Acquiring fuel retail outlets abroad will allow HPCL to make more money when prices go up, besides expanding operations. HPCL, which has more than 8,300 retail outlets in India, already has an agreement to manage the fuel-marketing business that Fijian Holdings had acquired from BP SWP in the South West Pacific countries of Fiji, Tonga, American Samoa, Vanuatu, Tuvalu and Cook Islands.
Given the geographic proximity of Fiji and New Zealand, it could also make a strategic sense for HPCL to build an international base in that region. Besides, HPCL could also be looking to build New Zealand as a market for exporting oil products from its Vishakapatnam refinery in southern India.