In a significant shift in ownership for one of India's leading lubricant brands, Castrol India is poised to come under the control of a New York-based investment firm. Stonepeak, a global infrastructure and real assets investor, has agreed to acquire a majority stake in the lubricants maker from Britain's energy giant BP as part of a larger $6-billion global transaction.
The Structure of the Landmark Deal
BP currently holds a 51% controlling stake in Castrol India, with the remaining 49% owned by public shareholders. As part of the global agreement, Stonepeak, in partnership with Canada's pension fund CPP Investments (CPPI), will acquire this majority holding. To comply with India's takeover regulations, the consortium has launched an open offer to purchase an additional 26% stake from public shareholders.
The open offer price has been set at Rs 194 per share, which is a slight premium over the stock's closing price of Rs 189.6 on the BSE this past Wednesday. The manager to the offer, UBS Securities India, stated that this open offer involves a substantial outlay of Rs 4,990 crore.
Globally, BP will sell 65% of the Castrol business to Stonepeak at an enterprise valuation of $10.1 billion. The agreement includes an option for BP to divest the remaining 35% after a two-year lock-in period. CPPI is investing $1.1 billion as part of this broader transaction.
Implications for BP and the Indian Market
This deal signifies a notable scaling back of BP's direct footprint in the Indian market, where it has been a major international energy player for decades. BP had originally acquired the 126-year-old Castrol brand from Burmah Castrol in the year 2000.
According to legal experts, the transaction structure is complex. Deep Chandan, Executive Director at Katalyst Advisors, explained that it involves an indirect transfer of the 51% equity stake in Castrol India. The offshore consideration, comprising cash and a 35% non-controlling equity interest in Stonepeak's acquiring entity, will be subject to Indian indirect transfer tax rules. Chandan noted that this structure is reminiscent of other landmark deals like the Adani Group's acquisition of Holcim's stakes in Ambuja Cements and ACC.
Once the transaction is finalized, BP's nominee directors will resign from the Castrol India board. This will allow Stonepeak, which manages over $80 billion in assets, to appoint its own representatives. The acquisition bolsters Stonepeak's presence in India, where it already has investments in sectors like data centers.
Future Shareholding and Broader Context
If Stonepeak and CPPI successfully acquire the full 26% stake through the open offer, their combined shareholding in Castrol India will rise to 77%. In such a scenario, the new promoters would be required to dilute their stake to 75% to meet India's minimum public shareholding (MPS) norms.
The sale of Castrol is a key part of BP's broader strategy to reshape its business, reduce costs, and strengthen its balance sheet. Earlier reports had indicated interest from other potential suitors, including Reliance Industries (RIL), Saudi Aramco, and private equity firms Apollo Global Management and Lone Star Funds.
It is important to note that BP will retain other interests in India outside of Castrol. These span petrochemical technology licensing, oil and gas trading, IT and financial services, and staffing for its global fleet. BP also maintains joint ventures with Reliance Industries, such as Reliance BP Mobility Limited, which operates the Jio-bp fuel retail network, and India Gas Solutions.
