State-run Oil and Natural Gas Corporation's (ONGC’s) plan to bring its entire refining and marketing business under one umbrella may get delayed further over its differences with Hindustan Petroleum Corporation (HPCL).
While ONGC wants the merger of Mangalore Refinery and Petrochemicals (MRPL) with ONGC Mangalore Petrochemicals (OMPL) first, sources said HPCL wants all the three to happen simultaneously. “Based on regulatory rules, two back-to-back restructuring cannot happen. If OMPL and MRPL are merged, the HPCL-MRPL merger will take some time. This is why the restructuring process is stuck now,” said an official from one of these companies on the condition of anonymity.
ONGC had completed its acquisition of 51.11 stake in HPCL for ~36,915 crore in January 2018. During that time, it was said that to bring further synergy in ONGC’s operations, HPCL and MRPL may be merged within six to eight months. Last year, Petroleum Minister Dharmendra Pradhan had also said that there may be further consolidation of all the downstream units of ONGC by bringing HPCL, MRPL, OMPL and ONGC Petro-additions Ltd (OPaL) under one umbrella.
Interestingly, the companies are yet to appoint a consultant or even take it to the respective boards. “Nothing concrete happened in this regard. We will have to take it to the boards for an in-principal approval, too. If it is a back-to-back restructuring, there will be a minimum cooling period for the second one to happen,” said another senior company executive. Once the approval comes from the respective boards, HPCL may look at various options, including buy out ONGC’s shares in MRPL, share-swap deal or a combination of both. At present, ONGC holds 71.63 per cent, while HPCL has 16.96 per cent stake in MRPL, putting the overall government stake at 88.58 per cent.
Though the ONGC-HPCL merger happened over 18 months ago, HPCL is yet to recognise ONGC as its promoter. Sources said the matter is in consultation with various regulators and a final call on whether ONGC will be officially recognised as a promoter will be coming soon.
The combined entity of HPCL and MRPL has over 35 million tonne (mt) of refining capacity and close to 16,000 retail outlets. By the end of 2018-19, India had a total installed refining capacity of 249.4 mt. Based on a report by the Petroleum Planning and Analysis Cell (PPAC), HPCL’s refining capacity during the period was 27.1 mt per annum while that of MRPL was 15 mt. As on July 1 this year, state-run Indian Oil Corporation (IOC) has the maximum installed capacity of 69.2 mt.