The IOC plans to monetize its assets through SPV and weapons
NEW DELHI: the largest oil refinery and fuel retailer in India, IOC , is looking to monetize its pipes and storage infrastructure.
The plan is to create special purpose vehicles (SPVs) or subsidiaries to take advantage of private equity and venture capital funds to maximize asset utilization and secure future income.
The BOOT option (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, in its 300,000 bpd Paradip refinery ( barrels per day) in Odisha
The sources told TOI that discussions between senior management and the parent oil ministry revolve around the creation of SPV or subsidiaries and then offer participation in them to PE or VC funds. The discussions are in an incipient stage and the amount of participation that will be offered will depend on the assets and their designs.
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.