Delay in DIPAM nod holds up Indian Oil's Mercator buyout

Indian Oil Corp (IOCL), the country’s biggest fuel retailer, is yet to secure state approval to complete the the acquisition of oil and gas company Mercator Petroleum more than four months after the National Company Law Tribunal allowed the sale of the distressed asset.

IOC is awaiting the go-ahead from the Department of Investment and Public Asset Management (DIPAM), which is the administrative platform for controlling government assets. The deal marked a rare acquisition by a public sector company through the insolvency process.

Creditors to Mercator are in a fix because the 60-day period to complete the acquisition has lapsed even as they contemplate approaching the NCLT to direct IOCL to complete the deal.

“There is complete silence from IOCL. The only thing creditors have heard is that DIPAM is yet to give a go ahead. Being a government company, even IOCL is constrained,” said a person aware of this deal.

A spokesperson at the oil retailer did not respond to ET’s email seeking comment.

In November, the Mumbai bench of the NCLT had approved IOCL’s acquisition of Mercator for ₹148 crore or about 31% recovery for total admitted dues of ₹482 crore. Secured creditors are to receive ₹135 crore for their admitted claims of ₹291 crore, while operational creditors including employees and vendors are to receive ₹5.40 crore against their total admitted claims of ₹73 crore. IOCL is also supposed to bear the process cost of ₹8.7 crore.

UTI Capital and Bank of Baroda (BoB) are financial creditors of Mercator, holding about 40% and 60% of the debt, respectively, with the proceeds to be distributed according to the debt holding. However, the expected recovery has been indefinitely delayed.”In normal course, creditors are quick to file a petition in the NCLT seeking expedition of the process but in this case, since a public sector entity is both the creditor and resolution applicant, there has been no movement,” said the person cited above.

BoB and resolution professional (RP) Krishna Chamadia did not reply to an email seeking comment.

An extension of the resolution timeline by the NCLT is still possible if the RP, IOCL or even lenders approach the court. Creditors are yet to take a call on what to do.

Mercator has terrestrial oil and gas search blocks in the Gulf of Khambhat, Gujarat which it won in 2008. The block has an estimated 4.55 crore barrels of oil reserves.

It is a good acquisition for IOCL because the block is located about 60 kilometers from the Koyali refinery block of petroleum behemoth.