HPCL stale sale to ONGC: Govt tweaks terms to avoid 'open offer' for public shareholders
Had HPCL been required to make an open offer, it would have had to shell out another Rs 17,100 crore to buy another 26 percent from open market
New Delhi: The government has tweaked the terms of sale of its 51.11 percent stake in HPCL to ONGC by including phrases that will help avoid triggering an open offer, an official said.
The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted 'in-principle' approval for strategic sale of the government's existing 51.11 percent stake in Hindustan Petroleum Corp Ltd (HPCL) to Oil and Natural Gas Corp (ONGC) "along with the transfer of management control, which will result in HPCL becoming a subsidiary company of ONGC".
The Department of Investment and Public Asset Management (DIPAM) had on 21 July used the same formulation to invite expression of interest from investment and merchant bankers to manage the transaction.
But, since the offer meant transfer of management control from government to ONGC, there was apprehension it would trigger Sebi's takeover code and compel ONGC to make an open offer to acquire an additional 26 percent stake from the minority shareholders, he said.
So, DIPAM on 7 August amended the terms to state that "HPCL will continue to be a Government company in terms of section 2(45) of the Companies Act, 2013 and will continue to be controlled by the Government of India through ONGC under the administrative control of the Ministry of Petroleum and Natural Gas".
Though the government is cashing out on its holding, the amended terms make it clear that it will continue to retain control of HPCL, the official said, adding since there is no transfer of actual control, there would be no requirement of an open offer.
At Wednesday's trading price of Rs 431.85, ONGC would have to pay Rs 33,633 crore for buying government's 51.11 percent stake. Had it been required to make an open offer, it would have had to shell out another Rs 17,100 crore to buy another 26 percent from open market.
Another official said ONGC will have to borrow about Rs 25,000 crore to fund just the purchase of government stake.
Half of the company's Rs 15,000 crore of cash has already gone into buying Gujarat State Petroleum Corp's stake in a KG basin gas block, and after accounting for capital expenditure requirement for the current year, ONGC would be left with Rs 4,000-5,000 crore.
The rest will have to be borrowed, he said.
Another change DIPAM made in the 21 July Request for Proposal (RFQ) by saying it wants to engage one advisor from reputed professional consulting firms/ investment bankers/merchant bankers/ financial institutions/ banks for managing the disinvestment process, and not two as was advertised previously.
Besides, one reputed law firm with experience and expertise in mergers and acquisitions or takeovers or strategic disinvestment would be appointed to act as legal adviser, according to the notice inviting bids.
Bids have been invited for consultants and legal adviser by 10 August, the notice said.
The official said the government is keen to complete the transaction within the current fiscal.
HPCL currently has 24.8 million tonnes per annum of refining capacity. Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary of ONGC, has 15.1 million tonnes capacity.
Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.
COVID-19 vaccine Covaxin phase-3 trial starts at AIIMS-Delhi; actively considering night curfew, AAP govt tells HC
With 44,489 more testing positive in a day, India's coronavirus caseload on Thursday increased to 92,66,705 while the toll mounted to 1,35,223 with 524 new fatalities, said the Union health ministry.
Delhi L-G okays proposal to cut presence of non-essential services staff in govt offices by 50% as COVID-19 cases rise
The proposal does not cover departments concerned with essential services, including health, police, home guards and civil defence, district administrations, fire, electricity and water, municipal services among others
Kerala Chief Minister Pinarayi Vijayan said that a detailed discussion will be held in the Assembly on the matter