Govt to get significant stake in HPCL post preference issue five years after exit

NEW DELHI: Five years after it exited the company, the government is set to get a significant stake in Hindustan Petroleum Corporation Ltd (HPCL) as it looks to infuse equity in fuel retailers that lost money on selling petrol and diesel at discounted rates last year, officials said.

The government had in the annual Budget for 2023-24 (April 2023 to March 2024 fiscal) announced Rs 30,000 crore of capital support to state-run fuel retailers — Indian Oil Corporation (IOC), HPCL and Bharat Petroleum Corporation Ltd (BPCL) — to support their energy transition and net-zero initiatives.

In June, the government asked IOC and BPCL to launch rights issues (to get the capital), and advised HPCL to make a preferential share allotment to the government. Board of IOC, earlier this month, approved raising up to Rs 22,000 crore by inviting existing shareholders to purchase additional new shares in the company (this type of issue gives existing shareholders securities called rights). The BPCL board too has approved raising up to Rs 18,000 crore through a rights issue, but the HPCL board is yet to approve the preferential issue.

Officials involved in the matter said HPCL board is awaiting guidance from the government before taking the preferential issue (which is nothing but the procedure of bulk allotment of fresh shares to a specific group of investors). Considering all existing shareholders of IOC exercising the option under the rights issue, the government would for its 51.5 percent stake in the company chip in Rs 11,330 crore. “Similarly, in case of BPCL, the government may end up paying about Rs 9,530 crore for its 52.98 percent stake in the company,” they said.

While the final numbers would depend on how many shareholders participate in the rights issue, fully-subscribed rights issue of IOC and BPCL would mean the government is left with anything between Rs 9,000 crore to Rs 10,000 crore out of the Rs 30,000 crore approved in the budget, for preferential issue of HPCL.

“At HPCL’s current market capitalisation of Rs 39,650 crore, this would translate into a significant stake,” they said, adding the exact equity holding would depend on the price at which shares are issued to the government.