Double drill for mega oil PSU merger

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New Delhi, Aug. 20: The ONGC-HPCL merger will be a two-stage process: first, the state-owned explorer will acquire the refiner and, in the second step, the downstream subsidiaries of ONGC will be merged.

“The move is to take one step at a time and not jumble up the process. The two-step process will help in a smooth transaction of the merger,” a senior oil ministry official said.

The two subsidiaries of ONGC are MRPL and OPaL. HPCL has a 16.96 per cent stake in MRPL, in which ONGC holds 71.63 per cent. ONGC has a 49.36 per cent stake in OPaL with GAIL holding 49.21 per cent.

They said the move was aimed at consolidating ONGC’s downstream operations, leaving it free to focus on exploration and production. HPCL will look after refining and marketing.

HPCL has 24.8 million tonnes per annum of refining capacity. Mangalore Refinery and Petrochemicals Ltd (MRPL) – a subsidiary of ONGC – has a capacity of 15 million tonnes (mt).

After the deal, HPCL will have 40mt capacity, the third-largest in the country after Indian Oil Corp (IOC) at 69.2mt and Reliance Industries at 62mt.

The ONGC-HPCL merger moved a step closer with PwC, JM Financial, EY, Rothschild (India) and ICICI Securities submitting expressions of interest to become advisers to the over Rs 33,000-crore deal.

The department of investment and public asset management (Dipam) has called for professional consulting firms and investment bankers to handle the sale of the government’s existing 51.11 per cent stake in HPCL to ONGC along with management control.

Dipam is looking to appoint one adviser for the strategic sale as also a law firm with experience and expertise in mergers and acquisitions or takeovers or strategic divestment.

Cyril Amarchand Mangaldas, Crawford Bayley & Co, Luthra & Luthra, Suman Khaitan & Company and Hammurabi & Solomon Partners are in race to be the legal consultant.

The government has formed a GoM (Group of Ministers), headed by finance minister Arun Jaitley, to oversee the transaction and help in taking quick decisions with regard to the timing, price, terms and conditions and other related issues.

Oil minister Dharmendra Pradhan and road transport and highway minister Nitin Gadkari are part of the ministerial panel.

For 2017-18, the total budgeted divestment target is Rs 72,500 crore, of which Rs 46,500 crore is expected to come in from minority stake sales, buybacks, mergers, public listings and through the CPSE exchange-traded fund route.

An amount of Rs 15,000 crore is budgeted to come in from strategic sales.

The remaining Rs 11,000 crore is expected to come from the listing of five state-owned general insurance companies.

The biggest strategic divestment that the Centre has planned for completion this financial year is the sale of its 51 per cent stake in HPCL to ONGC, a deal that could be valued at nearly Rs 33,800 crore.

Source