ONGC to buy govt’s 51.11% stake in HPCL for Rs36,915 crore
New Delhi: State-owned explorer Oil and Natural Gas Corp. Ltd (ONGC) on Saturday signed a deal with the President of India to acquire 51.11% stake in Hindustan Petroleum Corp. Ltd (HPCL), a state-run refiner, for Rs36,915 crore, ONGC said in a statement.
The ONGC board cleared the proposal on Friday to buy 778,845,375 equity shares in HPCL at a cash purchase consideration of Rs473.97 per share. The purchase price is at a premium compared to HPCL’s closing price of Rs416.55 on BSE on Friday. The scrip closed trading 5.5 points or 1.34% up on Friday.
The deal is exempt from a public offer as both the entities are related parties but the transaction involving two listed entities have been carried out on an arms length basis, ONGC said.
ONGC’s acquisition of HPCL will make the explorer a more integrated energy company and is a revenue booster for the government in a fiscally challenged year that saw falling indirect tax revenue and lower dividend receipts from the Reserve Bank of India. On Wednesday, the finance ministry had said that it has pared its additional borrowing requirement for the current fiscal to Rs20,000 crore from Rs50,000 crore as had been estimated earlier.
However, according to a government official, who recently spoke to Mint on condition of anonymity, any revenue receipt to the exchequer from the transaction was only incidental and the goal was to create an integrated energy company as articulated in budget 2017-18.
HPCL, which has refineries in Mumbai and Vishakhapatnam and a joint venture refinery in at Bhatinda with Mittal Energy Ltd, markets around 35 million tonne of petroleum products with a market share of about 21%. HPCL is also a leading lubricant marketer.
“The acquisition has been undertaken in furtherance of the government’s objective to combine the various central public sector enterprises to give them capacity to bear higher risks, avail of economies of scale, take higher investment decisions and create more value for the stakeholders and create an ‘oil major’ which will be able to match the performance of international and domestic private sector oil and gas companies,” said the ONGC statement echoing the objective for the deal as announced by finance minister Arun Jaitley in his budget speech last February.
“There is synergy between the assets of ONGC and HPCL and the transaction will deliver value to the acquirer in the medium to long term,” said K. Ravichandran, senior vice president and group head-corporate ratings at Icra Ltd.
SBI Capital Markets Ltd and Citi Global acted as transaction advisors, and Shardul Amarchand Mangaldas acted as the legal advisor to ONGC.
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