New Delhi: State-owned Hindustan Petroleum Corp Ltd (HPCL) will buyout shares of financial institutions ICICI Bank, ICICI Venture and HDFC in Prize Petroleum Co Ltd to make the oil exploration firm its wholly owned subsidiary.
HPCL and its partners had floated Prize Petroleum in 1998 to explore and produce oil and gas in India and abroad. HPCL owns 50% stake in the company, while ICICI Bank held 35% interest. ICICI Venture had 10% stake in and HDFC the remaining 5%.
“The Board of HPCL on 15 April approved acquisition of balance 50% shares held by other joint venture partners in Prize Petroleum Company Limited,” a top company official said.
HPCL will acquire 70 lakh shares held by ICICI Bank Ltd in Prize Petroleum at par value of Rs 10 each amounting to Rs 7 crore. Similarly, it will acquire 2 lakh shares held by ICICI Venture Capital for Rs 2 crore and 1 lakh shares held by HDFC for Rs 1 crore.
After the acquisition, Prize Petroleum will turn into a wholly owned subsidiary of HPCL.
It will also convert five crore Cumulative Convertible Preference Shares at the face value of Rs 10 each held in Prize Petroleum into five crores fully paid equity shares at par value of Rs 10 each.
HPCL was previously trying to buyout the financial institutions at discount but ICICI Bank and ICICI Venture wanted par value for their shares, the official said.
After the buyout, Prize Petroleum will takeover the oil and gas exploration and production business of HPCL.
Prize Petroleum was incorporated in 1998 with a seed capital of Rs 20 crores. The company was awarded contract to develop marginal fields in Hirapur, Khambel, West Bechraji and Sanganpur based on revenue sharing arrangements.
ONGC had awarded three offshore marginal fields in Cluster-7 to a consortium involving HPCL (60%), M3nergy-Malesia (30%) and Prize Petroleum with 10% participating interest.
The official said Prize Petroleum’s authorised capital was increased from Rs 120 crores to Rs 720 crores in the year 2001 to undertake crude exploration and production activities on a larger scale. However, the paid up capital remained at Rs 20 crores only.
While HPCL has been trying to increase its equity contribution in Prize Petroleum, financial institutions were not inclined to bring in any more equity.
The official said financial institutions had in 2008 decided to sell their stake to Jaiprakash Associates Ltd (JAL). However, JAL backed out at the last moment.
Meanwhile, HPCL in 2007 set up a separate business unit for carrying out exploration and production. This unit has 22 exploration blocks - 19 in India and three overseas.
“In order to bring all the E&P activities under one umbrella and to leverage and optimise assets, resources and capabilities of both Prize Petroleum and HPCL, it is proposed to convert Prize into wholly owned subsidiary company of HPCL by acquiring shares presently held by ICICI and HDFC,” he said.
“After acquisition, existing assets and resources of E&P department of HPCL can be taken over by Prize Petroleum”.