Centre gets Cabinet's nod for HPCL stake sale


Shares of Oil India (up 1.61 per cent), Hindustan Petroleum Corporation (up 1.29 per cent), Indian Oil Corporation (up 0.79 per cent), Bharat Petroleum Corporation (up 0.30 per cent) and Oil And Natural Gas Corporation (up 0.15 per cent) were trading as top gainers in the BSE Oil & Gas index in Wednesday's trade.

HPCL on the other hand has a market cap of Rs 58,485.55 crore and buying government's entire 51.11 per cent stake would entail an outgo of Rs 29,900 crore.

"This deal will make both ONGC and HPCL stronger as the benefits of synergy are huge", ONGC Chairman Dinesh Kumar Sarraf said in a phone interview on Wednesday. ONGC will buy govt's 51.11% stake in HPCL. The Union Cabinet is also likely to take up the ONGC-HPCL deal in its meeting later today and may spell out a final structure for the same, media reports said. In its current form, the deal will help the government achieve close to 40 per cent of its divestment target of '72,500 crore for this financial year. "Many options have been debated", he said. ONGC had evaluated options of acquiring either HPCL or BPCL - the two downstream oil refining and fuel marketing companies.

Finance Minister, Road and Transport Minister and Oil Minister will be a part of the merger panel. Possibilities of such restructuring are visible in the Oil and Gas sector.

The recent flurry of activity to integrate government-owned Oil Marketing Companies (OMCs) with oil and gas exploration companies follows Finance Minister Arun Jaitely's announcement during the 2017-2018 budget speech on the government's plan to create an integrated public sector "Oil Major" rivalling worldwide and domestic private sector oil and gas companies.

The move fulfills a plan, first outlined in February, to create an Indian oil giant through consolidation and mergers, forming a company comparable with worldwide rivals that could weather crude-price volatility.

"ONGC parentage could mean interference (from ONGC or government), highly probable participation in upstream and, more importantly, dilution of a high-performance culture", Ambit's analysts Ritesh Gupta and Gaurav Khandelwal wrote in a note, according to an ET report published Tuesday. The rest, such as ONGC Videsh, Chennai Petroleum Corp (CPCL), Numaligarh Refinery Ltd and MRPL, are already subsidiaries of one of these six PSUs.