(TT)
The Union cabinet is likely to take up the sale of a 51 per cent stake in HPCL to ONGC shortly. Officials said 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,” said officials who have worked on the cabinet note for the disinvestment.
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.Officials said that 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.
ONGC’s acquisition of HPCL’s stake will trigger the takeover code, and the oil explorer should normally make a public offer to buy out other shareholders. However, officials are considering taking a “special leave” or suspension from this provision. Once the cabinet gives its approval to the takeover, the government is expected to appoint merchant bankers who will advise on valuation, structuring and the actual implementation of the deal.
