ONGC buys 51.11% stake in HPCL for 36,915 cr

New Delhi, Jan. 20: Stateowned Oil and Natural Gas Corp ( ONGC) on Saturday announced acquisition of government’s entire 51.11 per cent stake in oil refiner HPCL for ` 36,915 crore, paying a premium of over 10 per cent.

ONGC will pay ` 473.97 per share for 77.8 crore shares of the government in Hindustan Petroleum Corp Ltd ( HPCL), the company said in a stock exchange filing.

The price it is paying is 14 per cent higher than Friday’s closing price of HPCL and over 10 per cent of the 60 - day weighted average of the scrip.

The transaction, which will help the government cross its annual sell- off ( disinvestment) target for the first time ever, has been executed through an off- market deal.

While the government started off talks for selling controlling stake in the country’s third largest oil refining and fuel marketing company, seeking about ` 1 lakh crore on grounds that an open sale would fetch no less than that, what ONGC paid was far less.

ONGC’s own valuation adviser EY had put HPCL’s valuation at ` 475 a share plus a premium for getting the controlling stake, sources privy to the negotiations said. The outside advise the company took from Citi put the price at ` 500 per share.

ONGC negotiated hard and brought down the acquisition price, they said, adding the company would do short- term borrowing to fund the acquisition that would be an all cash- deal to be completed by end of the month.

Also, the company has cash reserves of about ` 12,000 crore.

Sources said ONGC has already taken board approval for raising borrowing limit to ` 35,000 crore from the previous approval of ` 25,000 crores.

◗ ONGC will pay 473.97 per share for 77.8 crore shares of the government in HPCL