ONGC looks to raise debt to fund HPCL acquisition
New Delhi: State-owned explorer Oil and Natural Gas Corp. (ONGC) is looking at raising debt and selling some of its shareholding in other public sector companies to finance its Rs36,915 crore acquisition of a 51.11% stake in state-owned refiner Hindustan Petroleum Corp. Ltd. (HPCL).
ONGC chairman and managing director Shashi Shanker said the company will decide the most economical way of fund raising to conclude the deal by the end of January.
“We have cash balance with us. We have some liquid assets also (cross-holding in other state-owned companies). That is worth about Rs25,000-30,000 crore. Simultaneously, what we have done is that we have tied up short-term borrowing at a very competitive rate. When we have to make the payment (for the acquisition), we will look at all these options and whichever is the most economical for us, we will exercise that,” said Shanker.
ONGC has a cash balance of about Rs13,000 crore and holds a 13.77% stake in Indian Oil Corp. Ltd and 4.86% in GAIL India Ltd.
Shanker said that since the company wanted more flexibility in its funding options, it has raised borrowing limits to Rs35,000 crore from the Rs25,000 crore decided earlier.
He also ruled out fire sale of any liquid assets to finance the transaction.
After concluding the deal, ONGC will retain HPCL’s identity but explore synergies between the refiner and ONGC’s subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL).
“HPCL is a very professionally run company. It will continue the way it has been functioning. In our group, we have MRPL in the downstream sector. We can leverage their synergy. If we source crude oil together for MRPL and HPCL, we will have better bargaining power,” said Shanker.
ONGC’s acquisition of HPCL, announced on Saturday, is exempt from a public offer as both entities are related parties.
The deal is intended to make ONGC a more integrated energy company. It will also be a revenue booster for the government in a fiscally challenging year.
HPCL, which has refineries in Mumbai and Visakhapatnam and a joint venture refinery at Bhatinda with Mittal Energy Ltd, markets around 35 million tonnes of petroleum products with a market share of about 21%. HPCL is also a leading lubricant marketer.
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