HPCL-ONGC deal: Govt steps on the gas

Invites bids from consultants and law firms by August 10

Kicking off the process of stake sale in Hindustan Petroleum Corporation (HPCL), the department of investment and public asset management (Dipam) has started the process for selecting two consultants and a law firm.

“The government wants to complete the divestment within this year so the search for merchant bankers and legal advisors has begun,” said a person close to the development.

Interested parties have been asked to submit bids by August 10 for both the assignments.

The Cabinet Committee on Economic Affairs had on July 19 approved in principle the sale of government equity in HPCL, along with the transfer of management control to Oil and Natural Gas Corporation (ONGC).

The Cabinet has assigned a team headed by Finance Minister Arun Jaitley to oversee the transaction, specifically to decide time, price and terms and conditions related to the transaction.

The government plans to engage two advisors for providing advisory services and managing the disinvestment process.

The terms of reference include advising the government on the modalities and the timing of the strategic sale of the government’s 51.11 per cent paid up equity shareholding in HPCL to ONGC and to prepare and submit a detailed operational scheme to implement the strategic disinvestment process, indicating tentative timelines for each activity.

Whether ONGC will pay the government a premium for the HPCL stake is one issue that needs to be sorted out.

A law firm with expertise in mergers and acquisitions or takeovers or strategic disinvestment will also be engaged to act as legal advisor.

On Monday, Petroleum Minister Dharmendra Pradhan had said the move to make HPCL its subsidiary would provide ONGC enhanced capacity to bear higher risks, make bigger investment decisions and neutralise the impact of global crude oil price volatility.

The merger was first mooted by Jaitley in his last budget speech where he outlined a vertically integrated public sector oil major company having presence across the value chain.

Management of M&A

* On July 19, the CCEA had given nod for the sale of govt equity in HPCL, along with the transfer of management control, to ONGC
 

* The Cabinet has assigned an alternative team, headed by Arun Jaitley, to decide time, price and terms related to the transaction
 

* The govt plans a strategic sale  of 51.1% paid-up equity shareholding in HPCL to ONGC
 

* The govt plans to engage two advisors for providing advisory services and managing the disinvestment
 

* A law firm with expertise in M&As or takeovers or strategic disinvestment will also be engaged to act as legal advisor