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ONGC not to make open offer to HPCL shareholders post acquisition: Govt

Official says the govt's holding is being transferred to another PSU, but ownership isn't changing

Press Trust of India  |  New Delhi 

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and Natural Gas Corporation (ONGC) will not be required to make an open offer to of Hindustan Petroleum Corporation (HPCL) after buying out government's 51.11 per cent stake as the deal won't trigger takeover norms as did the of Indian Corporation (IOC) and Indo Burma Petroleum (IBP) in 2002, a senior government official said.

The Cabinet Committee on Economic Affairs (CCEA) last week gave in-principal approval of buying out government's entire 51.11 per cent stake in fuel retailing and marketing company will continue to be a separately listed company.

will not have to make an open offer to of as the government's holding is being transferred to another state-run firm, but the ownership isn't really changing.

"Open offer is not required because the management complexion is not changing. So it is a related party transaction," the officer said.

According to Sebi's takeover code, if a company acquires more than 25 per cent in another listed company, it has to make an open offer to to buy at least 26 per cent more in the target firm.

Way back in February 2002, state-owned had acquired government's 33.58 per cent stake in fuel retailer for Rs 1,153.68 crore and had to make an open offer for additional shares.

"and had happened through bidding route. Reliance Industries was among the bidders. That time, was being offered for outright sale, so when management chose to sell through bidding, the open offer got triggered," the official said, requesting anonymity.

In the present case, "in ONGC, I am transferring from direct government control to indirect holding," he said.

The government is 51 per cent owner of and 68 per cent owner of

"So, if one of the keeps the shares of the other, it is a related party But that does not mean [the] government has sold the company. [The] government will indirectly hold [a] stake in the company. It is a related party which should not trigger takeover code unless the valuations are absurd. If those conditions are satisfied, it will never happen. We have kept in mind interest of both ONGC and HPCL," the official said.

The deal, which flows from Finance Minister Arun Jaitley's Budget announcement of creating an integrated company, will help ONGC spread its risks.

From being a mere oil and gas producer, it will also have downstream oil refining and fuel retailing business. "When upstream business is down, downstream does great and vice versa. So now ONGC will be able to better manage its risks," he said. "Through this vertical integration, what private sector could not achieve, the government has achieved," he added.

HPCL will add 23.8 million tonnes of annual oil refining capacity to ONGC's portfolio, making it the third-largest refiner in the country after and Reliance Industries (RIL).

ONGC already is the majority owner of Mangalore Refinery and Petrochemicals (MRPL), which has a 15- million tonnes refinery.

First Published: Sun, July 23 2017. 13:59 IST