The board of ONGC on Monday gave 'in principle approval' for acquisition of the government stake in HPCL.
New Delhi: State-owned Oil and Natural Gas Corp (ONGC) will hire investment bankers to assist it in acquiring government's 51.11 per cent stake in Hindustan Petroleum Corp Ltd (HPCL).
The investment or merchant banker to be hired will be separate from the one the government is hiring to manage its disinvestment, a senior official said here.
The board of ONGC on Monday gave 'in principle approval' for acquisition of the government stake in HPCL, which at Tuesday’s trading price is worth about Rs 34,800 crore.
He said a six-member Committee of Directors has been constituted to examine various aspects of the acquisition and to provide its recommendations to the board.
The panel includes Chairman and Managing Director Dinesh K Sarraf and Director (Finance) A K Srinivasan as also independent directors K M Padmanabhan, Sumit Bose and Vivek Mallya.
Director (Technology & Field Services) Shashi Shanker, who has been selected to succeed Sarraf as the chairman of ONGC at the end of September, will also be part of the panel.
The official said the acquisition will be done as per the Sebi takeover code. The price would be most likely be six month average of HPCL scrip on the day of the decision.
The government last month had approved sale of its 51.11 per cent stake in oil refiner HPCL to India's largest oil producer ONGC. Prior to the merger, HPCL is likely to take over Mangalore Refinery and Petrochemicals Ltd (MRPL) to bring all the refining assets of ONGC under one unit.
ONGC currently owns 71.63 per cent of MRPL while HPCL has 16.96 per cent stake in it.
The official said ONGC will not have to make an open offer to minority shareholders of HPCL as the government's holding is being transferred to another state-run firm and the ownership is not changing. The deal will be completed within a year, he said.
HPCL will become a subsidiary of ONGC and will remain a listed company post the acquisition, the source said, adding the board of the refining and marketing company will continue to remain separate.
The government has also constituted a committee – headed by Finance Minister Arun Jaitley and comprising oil minister Dharmendra Pradhan and road minister Nitin Gadkari to work out the modalities of the sale.
Jaitley had, in his Budget for 2017-18, talked about creating an integrated oil behemoth. After that oil companies were asked to give their options. ONGC had evaluated options of acquiring either HPCL or BPCL -- the two downstream oil refining and fuel marketing companies.
It found the nation's second-biggest fuel retailer BPCL too expensive and conveyed its choice to the parent oil ministry. Sources said the transaction is likely to be completed within this fiscal year.
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 IOC and Reliance Industries.