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ONGC to acquire govt's stake in HPCL in bulk or block deal in Nov-Dec

ONGC has appointed SBI Caps and the Citi Group as its merchant bankers for the deal

Press Trust of India  |  New Delhi 

ONGC
A technician is pictured inside a desalter plant of Oil and Natural Gas Corp (ONGC) on the outskirts of Ahmedabad (Photo: Reuters)

The state-owned Oil and Natural Gas Corporation (ONGC) will acquire the government's 51.11 per cent stake in through a bulk or block deal sometime in November or December at the prevailing market price.

While the government is keen that the deal, which would fetch it over Rs 33,000 crore at the current market price, is done in October, wants time to raise the money required for the acquisition, a senior government official said.


The government's transaction advisor and legal consultant Cyril Amarchand Mangaldas is preparing Information Memorandum (IM) on Hindustan Petroleum Corporation Ltd (HPCL) with India's largest oil and gas producer, ONGC, in the next 7-10 days.

has appointed Caps and the as its merchant bankers for the deal and Shardul Amarchand Mangaldas as legal advisor, who would study the IM to arrive at a valuation for the takeover of the country's third-largest refining and oil marketing company.

The official said will do the due diligence of HPCL's based on the IM and publicly available information to arrive at the valuation. Negotiations between and the government will follow if the valuation is vastly different from the one the government has arrived at.

The share purchase would happen through a bulk or block deal at the prevailing market price, he said, adding that going by the pace of things, the deal could happen some time in November or December.

Both bulk and block deals are done on A block deal happens when a transaction involves a minimum quantity of 5,00,000 or a minimum value of Rs 5 crore between two parties. Such deal takes place through a separate window at the beginning of hours for the duration of 35 minutes i.e. from 9.15 am to 9.50 am in a price range of +1% to -1% (plus or minus 1 per cent) of the ruling market price.

A bulk deal is a trade where total quantity of bought or sold is more than 0.5 per cent of the number of of a listed company. Bulk deals happen during the normal window provided by the broker.

The official said the government's 51.92 crore could be sold to using either the bulk or block deal.

This would also help avoid triggering an open offer.

The Cabinet Committee on Economic Affairs (CCEA) had on July 19 granted 'in-principle' approval to the strategic sale of the government's existing 51.11 per cent stake in to "along with the transfer of management control, which will result in becoming a subsidiary company of ONGC".

But since the offer meant a transfer of management control from the government 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 minority shareholders, he said.

So, the terms of sale have been amended to state that "will continue to be a government company in terms of section 2(45) of the Act, 2013 and will continue to be controlled by the Government of India through 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 that since there is no transfer of actual control, there will be no requirement of an open offer.

At today's price of Rs 428.75, would have to pay Rs 33,268 crore for buying the government's 51.11 per cent stake. Had it been required to make an open offer, it would have had to shell out additional Rs 17,100 crore to buy another 26 per cent from the open market.

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

Half of the company's Rs 15,000 crore of cash has already gone into buying Gujarat State Petroleum Corporation's stake in a KG basin gas block, and after accounting for requirement for the current year, will be left with Rs 4,000-5,000 crore.

The rest will have to be borrowed, he said.

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

First Published: Tue, September 26 2017. 00:27 IST
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