ONGC to acquire HPCL in Nov-Dec

State-owned Oil and Natural Gas Corporation will acquire the government’s 51.11 per cent stake in Hindustan Petroleum Corporation Limited through a bulk or block deal sometime in November or December at the prevailing market price.

The state- owned Oil and Natural Gas Corporation (ONGC) will acquire the government’s 51.11 per cent stake in Hindustan Petroleum Corporation (HPCL) through a bulk or block deal sometime in November or December, at the prevailing market price.

While the government is keen that the deal, which would fetch it around ~33,000 crore at the current market price, is done in October, the ONGC wants time to raise the money required for the acquisition, a senior government official said.

The government’s transaction advisor, JM Financial, and legal consultant, Cyril Amarchand Mangaldas, is preparing an information memorandum (IM) on the HPCL with India’s largest oil and gas producer, the ONGC, in the next seven-10 days.

The ONGC has appointed SBI Caps and the citigroup as its merchant bankers for the deal and Shardul Amarchand Mangaldas as the legal advisor, who would study the IM to arrive at a valuation for the takeover of the country’s third-largest refining and oil marketing company. The official said the ONGC will do the due diligence of the HPCL’s assets based on the IM and publicly available information to arrive at the valuation. Negotiations between the ONGC and the government will follow if the valuation is vastly different from the one the government has arrived at.

The share purchase would happen through a bulk or block deal at the prevailing market price, he said, adding that going by the pace of things, the deal could happen sometime in November or December.

Both bulk and block deals are done on stock exchanges. A block deal happens when a transaction involves a minimum quantity of 500,000 shares or a minimum value of ~5 crore between two parties. Such deal takes place through a separate window at the beginning of trading hours for the duration of 35 minutes i.e. from 9.15 am to 9.50 am in a price range of plus or minus one per cent of the ruling market price.

A bulk deal is a trade where total quantity of shares bought or sold is more than 0.5 per cent of the number of shares of a listed company. Bulk deals happen during the normal trading window provided by the broker.

The official said the government’s 519 million shares could be sold to the ONGC. This would also help avoid triggering an open offer.