Hindustan Petroleum to acquire Mangalore Refinery and Petrochemicals in share-swap deal
At present, ONGC owns 71.63 percent stake in MRPL while HPCL has 16.96 percent
New Delhi: Hindustan Petroleum Corp Ltd (HPCL) is likely to acquire Mangalore Refinery and Petrochemicals (MRPL) in a share-swap deal to become India's second-largest oil refiner.
The merger is likely to take place after ONGC, country's biggest oil and gas explorer, completes acquisition of HPCL in an all-cash deal by December or January, officials in know of the development said.
MRPL is a subsidiary of Oil and Natural Gas Corp (ONGC). At present, ONGC owns 71.63 percent stake in MRPL while HPCL has 16.96 percent.
Once ONGC acquires 51.11 percent stake in HPCL, India's third-largest refiner, for about Rs 35,000 crore, it will have two refinery subsidiaries - HPCL and MRPL.
"It does not make economic sense to have two separate subsidiaries for the same business. And so the logical move would be to integrate MRPL with HPCL," an official said.
The government is selling its entire 51.11 percent holding in HPCL to ONGC for all-cash. HPCL will become a subsidiary of ONGC after the deal and retain independent board.
"HPCL can acquire MRPL either by buying out ONGC's shares, which at today's trading price is worth close to Rs 16,800 crore. The other option is share-swap, wherein ONGC will get more shares in HPCL in lieu of it giving up its control in MRPL," the official said.
Share-swap, he said, is most likely option for the merger.
"An exercise to arrive at valuations etc will begin shortly," he said.
Another official said it makes business sense for ONGC to bring all its refinery business under one umbrella.
He said the board of ONGC and HPCL are yet to consider the proposal.
HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio. This together with 15 million tonnes refinery of MRPL will create India's second-biggest state-owned oil refiner after Indian Oil Corp (IOC).
MRPL will be the third refinery of HPCL, which already has units at Mumbai and Visakhapatnam.
The government's selling its 51.11 percent stake in HPCL to ONGC will achieve the disinvestment target for the current fiscal.
The transaction will allow the government to monetise its HPCL ownership without losing ultimate control of the company.
When the issue first arose in August 2018, Oil Minister Dharmendra Pradhan had clearly stated that ONGC is the new promoter of HPCL.
Govt plans to fill strategic petroleum reserve by third week of May; to help refineries reduce excess crude
India plans to completely fill its strategic petroleum reserve (SPR) by the third week of May by moving about 19 million barrels into the sites by then, the managing director of the country’s SPR said on Tuesday
ONGC not to sell stake in IOC, GAIL in near future; repays close to third of Rs 24,881 cr loan to buy HPCL
ONGC had in January received government approval to sell its 13.77 percent stake in Indian Oil and 4.86 percent stake in GAIL to help fund the Rs 36,915 crore acquisition of HPCL.