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HPCL divestment: Cabinet to consider sale of Rs 26k-cr govt stake to ONGC

Post cabinet nod, HPCL will add 23.8 mn tonnes of annual oil refining capacity to ONGC's portfolio

Press Trust of India  |  New Delhi 

Union Finance Minister Arun Jaitley
Union Finance Minister Arun Jaitley

The is likely to consider this month sale of government's 51 per cent stake in Hindustan Petroleum Corp Ltd (HPCL) to and Natural Gas Corp (ONGC) for over Rs 26,000 crore.

The Department of Investment and Public Asset Management (DIPAM) in the Ministry of is moving a note for consideration of the for divesting government's entire 51.11 per cent shareholding in India's third-biggest fuel retailer to producer

The may take up the proposal this month, a source in the said. "It may come before the as early as 10 to 15 days," he said.

After the nod, the will move to appoint valuation and advisers while too may decide to hire merchant bankers to arrive at the valuation of shareholding.

Following up on Minister Arun Jaitley's Budget announcement of creating an integrated company, evaluated options of acquiring either or Petroleum Corp Ltd (BPCL) - the two downstream refining and fuel marketing

While acquiring either one of them made a lot of business sense, found the nation's second-biggest fuel retailer too expensive.

It then conveyed its choice to the parent ministry, which relayed it to DIPAM.

After few rounds of inter-ministerial consultations, DIPAM is now approaching the for a nod for the transaction, the source said, adding the is likely to be completed within this fiscal year.

has a cash reserve of Rs 13,014 crore and to fund the stake acquisition in HPCL, it will have to borrow at least Rs 10,000 crore, the source said.

has a market cap of Rs 95,447.12 crore and buying government's 54.93 per cent would alone have entailed an outgo of Rs 52,430 crore.

on the other hand has a market cap of Rs 51,764.25 and buying government's entire 51.11 per cent stake would entail an outgo of Rs 26,450 crore. Another Rs 13,450 crore or so would be required in case open offer for an additional 26 per cent has to be made.

Sources said while initially the was looking at creating an integrated company through merger of an producer with a refiner, the idea was dropped for the fear of not repeating the Air India-Indian Airlines kind of merger.

Similar differences in work culture and ethos prevail in upstream and downstream firms and so the exercise under consideration now is to only help mop up resources and would become a mere subsidiary of

already has a refining subsidiary in Mangalore and Petrochemcials Ltd (MPRL).

There are only six major in the sector - and Ltd being the producers, Corp (IOC), and in business and GAIL in midstream gas transportation business.

The rest such as Videsh, Corp (CPCL), Numaligarh Ltd and MRPL are already subsidiaries of one of these six PSUs.

Sources said the options were very limited and chose over

will add 23.8 million tonnes of annual refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after IOC and

already is majority owner of MRPL, which has a 15- million tonnes

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, July 06 2017. 20:54 IST