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Govt tweaks HPCL's terms of sale to ONGC to avoid 'open offer'

The official said the government is keen to complete the transaction within the current fiscal

Press Trust of India  |  New Delhi 

ONGC to takeover HPCL
The amended terms make it clear that it will continue to retain control of HPCL

The has tweaked the terms of of its 51.11 per cent stake in Corporation (HPCL) to Oil and the Corporation (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 of the government’s stake in to “along with the transfer of control, which will result in becoming a subsidiary company of ONGC”.

The Department of Investment and Public Asset (Dipam) had on July 21 used the same formulation to invite expression of interest from investment and merchant to manage the But, since the offer meant transfer of control from to ONGC, there was apprehension it would trigger Sebi’s takeover code and compel to make an open offer to acquire an additional 26 per cent stake from the minority shareholders, he said.

So, Dipam on August 7 amended the terms to state that “will continue to be a company in terms of section 2(45) of the Companies Act, 2013, and will continue to be controlled by the of India through under the administrative control of the Ministry of Petroleum and Natural Gas”.

Though the 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 price of Rs 431.85, would have to pay Rs 33,633 crore for buying government's 51.11 per cent 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 per cent from open market.

Another official said will have to borrow about Rs 25,000 crore to fund just the purchase of stake.

Half of the company's Rs 15,000 crore of cash has already gone into buying State Petroleum Corp's stake in a KG basin gas block, and after accounting for requirement for the current year, 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 July 21 Request for Proposal (RFQ) by saying it wants to engage one advisor from reputed professional consulting firms/ investment bankers/ merchant bankers/ financial institutions/ for managing the 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 would be appointed to act as legal adviser, according to the notice inviting bids.

Bids have been invited for consultants and legal adviser by August 10, the notice said.

The official said the is keen to complete the within the current fiscal.

currently has 24.8 million tonnes per annum of refining capacity. Mangalore Refinery and Ltd (MRPL), a subsidiary of ONGC, has 15.1 million tonnes capacity.

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