India to Export Petro Products to Pakistan

Petrol, diesel exports to fuel-starved neighbour will open up new markets for Reliance, Essar refineries

The thaw in relations between India and Pakistan, which started with cricket diplomacy at Mohali last month, could soon see India exporting petroleum products to its neighbour. 
India, which has surplus refining capacity, has agreed to export fuels such as petrol and diesel to Pakistan to help the neighbouring country meet its fuel shortfall and open up a new market for large refineries of Reliance Industries, Essar Oil and a new unit in which the LN Mittal Group is a co-promoter, government officials said. 
"Pakistan is keen to import refined petroleum products from across the border to save cost. The Indian side will firm up the proposal in an internal meeting on Monday before the bilateral meeting," one of the officials, with direct knowledge of the matter, said. 
India imports about three quarters of the oil it consumes, but its refining capacity has expanded rapidly, making it a key player in the international market. Exports of refined products have risen to 51 million tonnes in 2009-10 from 746,000 tonnes in 1999-2000 according to government data. Commerce secretaries of the two sides are meeting in Islamabad on April 27-28 to renew trade ties between the two countries, which have been at a standstill since November 2008 after the Mumbai terrorist attack. The acrimonious relations between the two neighbours eased last month when Prime Minister Manmohan Singh and his Pakistani counterpart Yusuf Raza Gilani watched the India-Pakistan World Cup semi-final together at Mohali. The two countries have fought three wars since both attained independence in 1947, besides a major skirmish in Kargil between May and July 1999. 
Indian officials said increased trade inter-dependence would force the two nations to keep friendly relations, and India was in a position to meet Pakistan's fuel demand. Pakistan has about 12-milliontonne refining capacity, which meets only half of its annual requirements, while India exports about 25% of its 185-million-tonne refining capacity. Talks Initiated in 2005 
India's exports of refined products are poised to jump further with expected addition of 30-milliontonne new capacities by March 2012 when the Bathinda, Bina and Paradeep refineries are commissioned. 
The 9-million-tonne Bathinda refinery near the Indo-Pak border is expected to be commissioned this year. Co-promoted by the LN Mittal Group and HPCL, the refinery has been eyeing the Pakistan market for its products, officials in the oil ministry said. 
Talks between India and Pakistan to start trade of petroleum products were initiated in 2005 by the then oil minister, Mani Shankar Aiyar, who favoured diesel supply to the neighbour. India had exported some petrochemicals such as PTA and LOBS to Pakistan through the sea route.

HAND OF FRIENDSHIP: Manmohan Singh with Yusuf Raza Gilani at Mohali

What are the global prospects for growth in 2011?

An international cast of Grant Thornton corporate finance partners gathered in London recently – offering the perfect opportunity to grill them about activity in their sector and whether there is a growing appetite for M&A.

You can view the full set of interviews on Grant Thornton's Mergers and acquisitions: global prospects for growth video, or read on for a summary.

The video opens with news from Grant Thornton's International Business Report, which annually surveys more than 11,000 global businesses. After two years of unprecedented financial and economic turmoil, it reports that M&A activity seems to be reappearing on the corporate agenda. Is that true everywhere and what issues are facing buyers/sellers in the current climate?

THE US
Stephen McGee, Grant Thornton US, reports that "most businesses feel like the worst is over" and that confidence is growing. Bank finance is returning and credit is more available, which in turn is increasing competition for assets as equity players – "back with a vengeance" – are competing with trade buyers who have record amounts of cash on their balance sheets.

However, he notes that the key issue facing buyers and sellers remains uncertainty about the strength of the recovery, which is then reflected in pricing. In the face of "anaemic growth", many companies are seeking strategic growth through M&A or to lower costs, but cross-border transactions are still, by their nature, viewed as more risky.

EUROPE
Europe delivers some mixed views. Kai Bartels, of Warth & Klein Grant Thornton Germany, notes that companies have been "less defensive" since January 2011 and more confident about M&A with German companies looking to Eastern Europe, India and China and cross-border transactions growing in importance for all PHBs.

But Arnaud Limal, Grant Thornton France, says there is still doubt and it is mainly large groups, who now have easier access to bank funding, who are thinking of M&A overseas; for smaller players, there is still caution especially after doing the painful work of restoring the balance sheet over the past two years. On M&A, he says pricing is the big issue with buyers unable to stretch themselves and sellers needing to have realistic expectations of value.

In the UK, Stephen Baker talks about companies who have cleared their balance sheets now looking for transactions in order to access growth but that the most important thing is to find the right deal, and the right quality of asset to buy/sell. He adds that coping with diligence is also a factor with deals taking longer to put together, often with six to nine-month timelines.

There is a UK appetite for BRIC M&A but for inbound acquisitions, these buyers require more time and investment as they tend to be less driven by typical UK auctions processes and more by a longer, more structured, relationship-building process in order to get a deal on the table.

INDIA
Vikesh Mehta, Grant Thornton India, says that India was fairly well insulated from the global crisis, in part due to Indian corporates reliance on domestic markets. He reports a "very positive" climate with the private equity market becoming a strong driver of growth. In fact, he says, India has seen a clear shift in preferences away from traditional bank funding towards private equity investment.

There has been an "acquisition spree" in India with significant outbound cross-border acquisition activity occurring, as well as India's own domestic growth story. Again, with a lot of money chasing fewer investments, the key in the current climate is finding them.

ASIA
The good news is that there is a lot of interest in M&A from private equity, says Ken Atkinson, Grant Thornton Vietnam, but at the same time, Asia is entering a new phase of high inflation with governments introducing measures to control that.

He also notes high expectations by sellers in Asia who are optimistic about getting a good valuation for their business. Meanwhile, buyers are looking to areas rich in resources such as China, South America, Australia and the Middle East.

Grant Thornton corporate finance teams offer M&A, transaction services, valuations and capital markets advice in more than 60 countries. For further information, visit our Corporate Finance pages.