Cabinet allows ONGC to buy out govt stake in refiner HPCL

Cabinet May Decide On Hpcl Stake Sale To ONGC Tomorrow
Cabinet may discuss stake sale of HPCL to ONGC
Author

19 July, 2017

Following the announcement, shares of ONGC traded 0.80 per cent higher at Rs 163.05, while those of HPCL were up 1.95 per cent at Rs 375.95.

The Union Cabinet on Wednesday gave its in-principle approval to the merger of oil marketer Hindustan Petroleum Corp Ltd (HPCL) with state-run explorer Oil and Natural Gas Corp. As part of the transaction, HPCL may takeover operations of Mangalore Refinery and Petrochemicals Ltd. ONGC now owns 71.63 per cent of MRPL while HPCL has 16.96 per cent stake in it.

However, there was no clarity yet on the price that ONGC will pay for the acquisition.

According to various reports, the government is also mulling whether to approach capital markets regulator SEBI (Securities Exchange Board of India) to seek an exemption for making an open offer to other shareholders. The government will form a committee to frame the modalities and oversee the proposed merger. It will remain a separate entity and operate as ONGC's subsidiary.

ONGC Chairman and Managing Director Dinesh K Sarraf said the funding plans for the acquisition are in place but refused to reveal them citing market sensitivities. "Many options have been debated", he said. The source said it makes better sense for ONGC to consolidate all the refining operations in one unit, he said.

Earlier in February, Finance Minister Arun Jaitley proposed setting up an integrated oil PSU (public sector undertaking) by merging companies with synergy in order to match the scale of the global oil giants.

It found the nation's second-biggest fuel retailer BPCL too expensive and conveyed its choice to the parent oil ministry.

Another source said the transaction is likely to be completed within this fiscal year.

ONGC now owns 71.63 per cent of MRPL while HPCL has 16.96 per cent stake in it.

As is widely known, the government is planning to combine HPCL with ONGC by December this year by selling its 51.1% stake in the former to the latter.

"We propose to create an integrated public sector oil major which will be able to match the performance of worldwide and domestic private sector oil and gas companies", Jaitley said. Possibilities of such restructuring are visible in the Oil and Gas sector.


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