IOC plans monetise its assets through SPVs, arms
Times of India, Delhi   03-Jan-2020

India's largest oil refiner and fuel retailer, IOC, is looking at monetising its pipelines and storage infrastructure.

The plan is to create special purpose vehicles (SPVs) or subsidiaries to tap private equity and venture capital funds to maximise utilisation of assets, and lock in future revenue.

The option of BOOT (build, own, operate and transfer) is also on the table as the company has successfully implemented this model for the tank farm, the vital storage facility, at its 300,000bpd (barrels-per-day) Paradip refinery in Odisha.

Sources told TOI the discussions among the top management and the parent oil ministry revolve around creating SPVs or subsidiaries and then offering stake in them to PE or VC funds. The discussions are at a nascent stage and the quantum of stake to be offered will depend on the assets and their layouts.

"Given the low interest rates abroad, many PE and VC funds are willing to invest in IOC assets as they offer assured and elevated returns due to high utilisation as well as a quick exit option, while the asset can remain with IOC - something like a hospitality arrangement," one executive told TOI.

The PE route, thus, is seen as economical funding source for IOC without losing assets. PE funding will lock in future revenue at today's value. It will provide money for the expansion, reduce borrowings and interest outgo. This will raise profitability and dividend payout.

On New Year Day, IOC chairman Sanjiv Singh told employees not to "consume WhatsApp theories" and focus on the company's inherent strengths to prepare for the changing energy market architecture.