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IOC drops Chennai Petroleum merger plan

IOC holds 51.89 per cent stake in CPCL and had planned to merge the company with itself

Press Trust of India  |  New Delhi 

Indian Oil Corporation logo outside a fuel station in New Delhi. Photo: Reuters
Indian Oil Corporation logo outside a fuel station in New Delhi. Photo: Reuters

State-owned (IOC) has dropped plans to merge its subsidiary (CPCL) with itself, a top company official said.

holds 51.89 per cent stake in and had planned to merge the company with itself like it had done with another subsidiary, Bongaigaon Refinery and Petrochemicals Ltd (BRPL), more than a decade ago.

But unlike BRPL, has National Iranian Oil Co (NIOC) as a shareholder with a 15.40 per cent stake. was hoping that NIOC may not invest in expansion of CPCL, giving the state-owned retailer a reason to seek the Iranian company's exit.

"They (NIOC) have decided to participate in setting up a new 9-million tonne per annum refinery at the Cauvery basin, Nagapattinam, at an estimated cost of Rs 27,460 crore," he said in New Delhi.

The Iranian company wants to stay invested in CPCL, he said. "We won't like to merge till they are there. If we were to merge with under the present shareholding, NIOC would get a stake, although small, in "

NIOC holding a stake in would be "risky proposition" in view of threat of US sanctions on Iran and its state- controlled firms, he explained.

If NIOC was to attract sanctions, risks being exposed to actions by the US by virtue of its shareholding in the company.

"We won't like to be exposed to any such thing (sanctions)," he said.

While does not have any international exposure that may threaten its business in case NIOC is sanctioned, has major dealings with the US including recent buying of US oil.

NIOC holds a 15.4 per cent stake in through its Swiss unit, Naftiran Intertrade.

was keen to merge with itself as viability of a stand-alone refinery in the current scenario was questionable.

is a stand-alone refinery, operating a 10.5-mt unit at Manali in Tamil Nadu and another 1 mt plant at Nagapattinam.

It had been through rough times in recent years and was even reported to the Board for Industrial and Financial Reconstruction (BIFR) in 2014-15 due to an erosion of more than 50 per cent in its net worth to Rs 1,655 crore.

managed a turnaround last fiscal with a profit of Rs 1,029.75 crore.

CPCL, formerly known as Madras Refineries Ltd, was formed as a joint venture in 1965 between the Government of India, AMOCO and NIOC having a shareholding in the ratio of 74 per cent, 13 per cent and 13 per cent, respectively.

In 1985, AMOCO disinvested, following which, the government held 84.62 per cent and NIOC 15.38 per cent.

The government later disinvested 16.92 per cent of the paid-up capital. The company was listed in 1994.

acquired the government stake in 2000-01 and holds 51.89 per cent stake in while NIOC has 15.40 per cent.

First Published: Thu, October 12 2017. 15:28 IST
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