Cabinet allows ONGC to buy out govt stake in refiner HPCL

Cabinet may discuss stake sale of HPCL to ONGC

Cabinet may discuss stake sale of HPCL to ONGC

State-run explorer Oil and Natural Gas Corporation (ONGC) has forwarded a proposal to acquire Hindustan Petroleum Corporation Limited (HPCL), oil minister Dharmendra Pradhan said in the upper house today. Later, another news report said that ONGC officials are of the view that no premium is required to be paid since HPCL is openly traded in the market and is already fairly valued. He added that the process for in-principle approval for this proposal has been initiated. The government will form a committee to frame the modalities and oversee the proposed merger.

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

Before the ONGC-HPCL merger, ONGC will merge with the Mangalore Refinery and Petrochemicals Ltd (MRPL).

After the Cabinet nod, the government will move to appoint valuation and transaction advisers while ONGC too may decide to hire merchant bankers to arrive at the valuation of government shareholding.

HPCL on the other hand has a market cap of Rs 58,485.55 crore and buying government's entire 51.11 per cent stake would entail an outgo of Rs 29,900 crore.

"The synergy benefits for the companies would be huge", Sarraf said.

Finance Minister Arun Jaitley in this year's Budget had proposed to create an integrated public sector "oil major" that can rival global giants.

Similar differences in work culture and ethos prevail in upstream and downstream firms and so the exercise under consideration now is to only help the government mop up resources and HPCL would become a mere subsidiary of ONGC. "Possibilities of such restructuring are visible in the oil and gas sector", he said.

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