Govt to sell `28K-stake in HPCL to ONGC
ONGC to acquire stake in a potential `28,000-cr deal
The government on Wednesday gave its inprinciple approval to sell its `28,000 crore stake in Hindustan Petroleum Corporation Ltd (HPCL) to the country’s biggest explorer ONGC.
The Union Cabinet’s approval for the sale of its 51 per cent stake in HPCL, the country’s third largest refiner, to ONGC will help set up an oil behemoth and facilitate further consolidations in the future.
While ONGC buying HPCL will help the government meet about 40 per cent of its target of raising `72,500 crore in the current fiscal through stake sales, more deals in the oil sector are also in the offing.
Sources said that refiner Indian Oil Corp (IOC) may buy out explorer Oil India Ltd, and Bharat Petroleum Corp Ltd (BPCL) may merge with gas utility GAIL.
The government on Wednesday gave an inprinciple approval to its `28,000-crore stake sale in Hindustan Petroleum Corp Ltd (HPCL) to the country’s biggest explorer ONGC, sources said.
While ONGC buying HPCL will help the government meet as much as 40 per cent of its target for raising `72,500 crore in the current fiscal through stake sales, more deals in the oil sector including one where refiner Indian Oil Corp (IOC) buys out explorer Oil India or Bharat Petroleum Corp (BPCL) merges with gas utility GAIL may be in the offing.
The source said the Cabinet headed by Prime Minister Narendra Modi gave inprincipal approval for ONGC buying Hindustan Petroleum Corp Ltd (HPCL).
Oil minister Dharmendra Pradhan is likely to make a statement on the deal as well as other potential mergers on Thursday afternoon in Parliament.
Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals (MRPL) to bring all the refining assets of ONGC under one unit. ONGC currently owns 71.63 per cent of MRPL while HPCL has 16.96 per cent stake in it.
HPCL buying ONGC stake will give the explorer `16,414 crore at today’s closing price. ONGC, which has cash reserves of `13,014 crore, also has an option to sell part or all of its 13.77 per cent stake in IOC which is worth nearly `25,000 crore.
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 staterun firm and the ownership isn't changing. The deal will be completed within a year, he said.
HPCL will become a subsidiary of ONGC and will remain a listed company post the acquisition, he said adding the board of the refining and marketing company will continue to remain in place.
HPCL has a market cap of `58,485.55 crore, based on Wednesday’s closing price of `384 a share on the BSE.
At Wednesday’s rate, ONGC will have to shell out close to `30,000 crore for the government’s 51.11 per cent but the actual price may be either of one-year, 26 week or 60 day average scrip price, the source said.
ONGC chairman and MD Dinesh K. Sarraf said the funding plans for the acquisition are in place but refused to reveal them citing market sensitivities. “Many options have been debated,” he said.
Meanwhile in another significant decision, the Cabinet cleared a 15 per cent hike in salaries for public sector company employees.
The Cabinet approved implementation of the recommendations of the 3rd Pay Commission for central public sector enterprises’ employees, sources said.