Cabinet approves ONGC buying govt's 51% stake in HPCL

Reuters

On Wednesday, the central government is likely to consider the sale of government's 51.11% equity stake in Hindustan Petroleum Corporation (HPCL) to Oil and Natural Gas Corporation (ONGC) for more than Rs 28,000 crore. As per Wednesday's closing price, a 51.11 per cent stake in HPCL is worth almost Rs 30,000 crore.

ONGC has sent a proposal to acquire HPCL and the Petroleum Ministry is working on in-principle approval to the plan, Petroleum Minister Dharmendra Pradhan said on Wednesday. HPCL will continue as a listed subsidiary of its new parent, which will become a truly integrated entity that will be better equipped to tide over the ebb and flow of prices in the oil production and refining-marketing businesses. ONGC will buy govt's 51.11% stake in HPCL.

Pre-merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd.to bring all the refining assets of ONGC under one unit. "HPCL stake value to be decided by buyer and seller". He also said that they have already chalked out a funding plan and that the ONGC-MRPL deal would be done before the merger. In its current form, the deal will help the government achieve close to 40 per cent of its divestment target of '72,500 crore for this financial year.

The source said ONGC will not have to make an open offer to minority shareholders of HPCL as the government's holding is being transferred to another state-run firm without change in ownership.

Finance Minister, Road and Transport Minister and Oil Minister will be a part of the merger panel.

State-owned oil companies had started looking at possibilities of mergers and acquisitions among themselves after the government said earlier this year that it would look at creating integrated public sector energy majors. Once the government officially notifies the decision, the board of ONGC will consider buying out HPCL and valuations will then be worked out, he said.

The move fulfills a plan, first outlined in February, to create an Indian oil giant through consolidation and mergers, forming a company comparable with worldwide rivals that could weather crude-price volatility.

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