New Delhi: The Cabinet Wednesday approved sale of government’s 51.11 per cent stake in oil refiner HPCL to India’s largest oil producer ONGC for a potential Rs 26,000 crore to Rs 30,000 crore, a top source said.
While ONGC buying HPCL will help the government meet as much as 40 per cent of its target for raising Rs 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 Ltd or Bharat Petroleum Corp Ltd (BPCL) merges with gas utility GAIL may be in the offing.
The source said the Cabinet headed by Prime Minister Narendra Modi gave in-principal approval for Oil and Natural Gas Corp (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 Thursday afternoon in Parliament.
Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd (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 Rs 16,414 crore at today’s closing price. ONGC, which has cash reserves of Rs 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 Rs 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 state-run 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 Rs 58,485.55 crore, based on Wednesday’s closing price of Rs 384 a share on the BSE.
At Wednesday’s rate, ONGC will have to shell out close to Rs 30,000 crore for 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 Managing Director 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.
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.
ONGC has cash reserves of Rs 13,014 crore and to fund the government stake acquisition in HPCL, it will have to borrow at least Rs 10,000 crore, the source said. PTI