On July 12, both the ONGC and HPCL rose by almost 3 per cent. The ONGC stock...
moved 2.96 per cent to Rs 164.75 on BSE. It opened at Rs 296 and touched an intraday high and low of Rs 296 and Rs 290.50 respectively, in trade so far. Shares of HPCL gained 2.65 per cent to Rs 351. Other oil stocks like IOC (Indian Oil Corporation) and BPCL (Bharat Petroleum Corporation Limited) also gained.
The Telegraph quoted officials as saying that the deal was being arranged not as a merger exercise but restructuring to make HPCL a subsidiary of ONGC.
"HPCL will not be merged with ONGC, it will be made a subsidiary. This is significant as it will help create greater value for both ONGC and HPCL and of course for the ultimate owner - the government," the daily quoted officials who have worked on the cabinet note for the disinvestment as saying.
The deal will lead to the transfer of over Rs 25,000 crore from ONGC to the government coffers as consideration from the sale. Till now, the government has managed to sell stakes in state-run firms aggregating Rs 7,896.87 crore this fiscal.
The takeover by ONGC, which has a market capitalisation of Rs 2 lakh crore, will make it one of Asia's largest oil and gas players both by market capitalisation and assets.
The buyout of HPCL may be the first of many more moves in oil and gas where the government aims to create global giants. No Indian company figures on the list of Top-25 global oil and gas majors.
Following up on Finance Minister Arun Jaitley's Budget announcement of creating an integrated oil PSU, ONGC had calculated options of acquiring either HPCL or Bharat Petroleum Corp Ltd (BPCL) - the two downstream oil refining and fuel marketing companies. However, ONGC found the nation's second-biggest fuel retailer BPCL too expensive. It then conveyed its choice to the parent oil ministry, which relayed it to DIPAM (Department of Investment and Public Asset Management).
Earlier, PTI had reported that the Cabinet is likely to consider this month sale of government's 51 per cent stake in Hindustan Petroleum Corp Ltd (HPCL) to Oil and Natural Gas Corp (ONGC) for over Rs 26,000 crore in the month of July. According to the report, the (DIPAM) in the Ministry of Finance was moving a note for consideration of the Cabinet for divesting government's entire 51.11 per cent shareholding in India's third-biggest fuel retailer HPCL to oil producer ONGC.
HPCL has a market cap of Rs 51,764.25 and ONGC's bid to buying government's entire 51.11 per cent stake would entail an outgo of Rs 26,450 crore. HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and Reliance Industries.