(FE)
There is a spanner at works in the ONGC- HPCL deal as the Oil Ministry has raised concerns over valuation of the deal and availability of immediate funds with ONGC. Other than being in favour of waiting for a while to allow ONGC time to raise enough, Oil Ministry is of the view that the deal may delay fundraising plan of the PSU, ET Now reported citing unidentified sources. In addition, Oil Ministry has concerns on the fact the deal values HPCL at Rs 30,000 crore which is well below the market value. While Finance Ministry wants the deal to be finalised soon due to deficit concerns, Oil Ministry is uncertain about the completion of the ONGC-HPCL deal in FY18.
The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted in-principle approval to the strategic sale of the government’s existing 51.11 percent stake in HPCL to ONGC. It was estimated that ONGC would have to pay Rs 33,268 crore for buying the government’s 51.11% stake. In wake of lower tax collections and reduced RBI dividend, the government is eyeing to extend its disinvestment target to Rs 1 lakh crore as against FY18 budget target of Rs 72,500 crore. According to ET Now, the deal values HPCL’s stake at around Rs 30,000 crore. In September-17, PTI reported that ONGC will acquire the government’s 51.11 percent stake in HPCL through bulk or block deal in November or December. Post-merger, HPCL will retain its brand. ONGC has appointed SBI Cap and the Citi Group as its merchant bankers for the deal and Shardul Amarchand Mangaldas as legal advisor to arrive at a valuation for the takeover of the country’s third-largest refining and oil marketing company.
