The Indian Oil Corporation (IOC), commonly known as IndianOil, will acquire 50 percent stakes in Bangladesh's Beximco LPG at an undisclosed figure.
RR Holdings Ltd, a UAE-based firm that owns Beximco LPG of Bangladesh and IOC Middle East, a wholly-owned subsidiary of Indian Oil Corporation, signed an agreement on Tuesday to form a joint venture company in a virtual meeting.
RR Holdings and IOC Middle East will own equal shares in the joint venture company that will begin functioning by acquiring Beximco's existing LPG assets.
Both sides believe that the joint venture company will be able to lead Bangladesh's LPG (liquefied petroleum gas) market by diversifying products and markets, and also export this cooking gas to land-locked northeast India.
Shayan F Rahman, chairman of RR Holdings Ltd, said he was proud to join forces with India's largest refiner and marketer of petroleum products IndianOil, combining Beximco's downstream value chain and customer insights with IOC's unparalleled strength and expertise across the entire hydrocarbon sector.
"Together, we believe our combined strengths will enable us to become the largest downstream oil and gas company in Bangladesh," Shayan told The Business Standard.
He declined to comment on the financial value of the Beximco LPG's share sale to IOC.
Sanjiv Singh, chairman of IndianOil, said the company started its business in Bangladesh with marketing lubricants in 1999.
"Today, we are joining hands with a formidable partner in Bangladesh," said Sanjiv.
He said the LPG market in Bangladesh has seen a five-fold growth in the past five years and is expected to grow at a CAGR of 12-13 percent. The joint venture company will draw strength from the core competencies of IndianOil and the local expertise of Beximco, he said.
"As per the business plan, the company will begin functioning by acquiring Beximco's existing LPG assets. We intend to set up a large LPG terminal at a deep-water port in Bangladesh, which will facilitate receipt of LPG in Very Large Gas Carriers, leading to reduction in cost of imports," he said.
Reduction in cost of import will help make LPG available at an affordable price to the people of Bangladesh, said the IOC chairman.
Dharmendra Pradhan, minister of Petroleum and Natural Gas and minister of Steel in India, presided over the deal signing ceremony.
He said the agreement is a major milestone in the annals of India-Bangladesh cooperation when a group company of IndianOil, based in Dubai, is joining hands with one of the most promising LPG companies in Bangladesh through its holding company in UAE for LPG business in Bangladesh.
Salman Fazlur Rahman, private industry and investment adviser to the prime minister of Bangladesh, said the joint venture company should serve as a testament to the remarkable investment potential of Bangladesh under the leadership of Prime Minister Sheikh Hasina.
"At a time when the entire world is grappling with the severe economic consequences of the Covid-19 pandemic, this investment also reflects the resilient and enduring friendship between Bangladesh and India," he commented.
Nasrul Hamid, state minister for Power, Energy and Mineral Resources, said as Bangladesh's middle class is rising with higher purchasing power, the LPG sector has seen an exponential boom over the years and is set to grow further in the coming years.
As such, a partnership and investment of this scale between two experienced and major players has every potential to be a true game changer in the industry, he noted.
Bangladesh is already saturated in the LPG market with around 20 companies in operation. Industry players said top five companies hold around 85 percent market shares and the remaining ones are struggling to get their market shares.